Investment analysis Essay Example | Topics and Well Written Essays - 2000 words

Investment analysis - Essay Example duck line of descent is an investment partnership of limited wealthy investors or institutions. The minimum investment requirement for entering a evade fund is much higher than many other investment options. It is also a super illiquid investment as the fund stays invested at least for a period of one year. Hedge fund is as similar as a mutual fund but differs in quantum of its investments and act of its participants. It is also less regulated than a mutual fund. Hedge cash in hand atomic number 18 managed by a team of experts headed by portfolio managers. Most of the investors give have a say in the management of the fund. This testify will give a brief idea about the strategies espouse by hedge funds for managing funds and the implication of its exploits in the overall financial sector. Hedge funds and its mode of operation Hedge funds operate in various methods to handle investment risk. There are some(prenominal) strategies being ado pted by Hedge Funds to minimise the investment risk. Some of the most of import strategies are Long/Short Equity, Global Macro, Event Driven, Emerging markets, Equity Market-Neutral, Convertible Arbitrage, Fixed-Income Arbitrage, Short Sellers and Managed Futures. These strategies will be dealt in detail further. Long/ pitiful equity As the name implies this dodging involves taking both long and short positions on line of merchandises. The core concept of this strategy is to go short on overvalued stock and long on undervalued stocks. This strategy is adopted to make profit irrespective of whether the market boot out or fall. It is used by hedge fund managers to make profit on both sides. The undervalued stock will increase in value to make profits while at the same age the value of overvalued stock will come blue thus making profit on its short positions. Thus, the goal of any equity long-short strategy is to minimise exposure to the market in general, and profit from a chan ge in the difference, or spread, between two stocks. (Barclay Hedge, 2011) Global Macro Global Macro is a more sustainable investment strategy in the sense that it is based on top down analysis or the fundamentals. As the name signifies, this strategy considers the macro economic variables. Company specific investments are also based on factors like management quality, market share, company profits, market competition, financial position, and the like. This strategy also invests in all kinds of investment options like equities, commodities, currencies, etc. Hedge fund managers also hedge such portfolio with the use of necessary derivatives and other instruments. This has been proved to be one of the most successful strategies adopted by Hedge Funds. Event Driven An event-driven investment manager is typically looking to invest in situations where there is some form of corporate activity or catalytic change taking place. (Leary, 2004) The events entangle mergers and acquisitions, ba nkruptcy, asset sales, or any other restructuring pertaining to a particular company. Hedge fund managers predict the straw man of the share price based on the nature of the event related to the company. For example a gap