Absolute Return Funds are internationally known as Hedge Funds. Hedge Funds are often deemed high risk/high return investment products. This is because they have gained notoriety for making rich investors, like George Soros, John Henry & others, very rich. Hedge Funds use diverse investment strategies, so are typically deemed out-of-reach to
average investor. In fact, Absolute Return Funds are deemed to have same volatility of bonds but with a much higher rate of return.In this article you will discover:
* What is an Absolute Return Fund? * How Absolute Return Funds play a part in your portfolio
What is an Absolute Return Fund?
Absolute Return Funds are actively managed investments that aim to produce returns in both rising and falling markets through use of a broad range of investment techniques. Traditional investment funds tend to invest directly into stocks, which may go either up or down. Absolute Return Funds have greater scope to use derivatives, short positions, and non-traditional securities to ensure their positions are protected in bearish markets.
Absolute Return Funds are massively diverse in size, scope and philosophy. The investment strategy employed by fund manger will dictate whether investors receive returns in form of income, capital appreciation, or both. The risk profile of absolute return funds can also range from very conservative to very aggressive. The difference in return and risk profile is determined by exact instruments used by fund manager. These methodologies will be highlighted in fund’s Product Disclosure Statement or Prospectus.
The main characteristics of Absolute Return Funds are:
* Non-traditional investment techniques such as short-selling, derivatives, warrants * Performance incentives to align investor and manager interests * The use of gearing to increase investment positions and potential returns * Accepting pf new investments to effectively implement their complete investment strategy * Minimal exposure to potential market actions
