A hedge fund is a privately pooled investment that uses various complex strategies to deliver high returns while ‘hedging’ risks. Hedge fund firms collect funds from accredited investors such as financial institutions, insurance companies, HNIs (high-net-worth individuals), and pension funds.
This post lists the best-performing hedge funds of 2022, features, benefits and things to consider before investing in hedge funds. Read on!
The following hedge fund firms are the largest in terms of AUM (Assets Under Management).
|S No.||Name of the Hedge Fund Firm||AUM|
|1.||Blackrock Advisors||$10 trillion as of December 31 2021|
|2.||Citadel Advisors LLC||$244.3 billion as of May 27 2021|
|3.||Bridgewater Associates||$223 billion as of November 19 2021|
|4.||AQR Capital Management||$164.4 billion as of November 24 2021|
|5.||Renaissance Technologies||$130 billion as of June 3 2021|
|6.||Man Group Plc||$77 billion as of June 30 2021|
|7.||Two Sigma Investments LP||$68.9 billion as of September 27 2021|
|8.||DE Shaw & Co.||$60 billion as of December 1 2021|
|9.||Millennium Management||$57 billion as of December 31 2021|
|10.||Elliot Asset Management||$51.5 billion as of December 31 2021|
Hedge funds are unregistered private investments that invest and trade across a wide variety of markets and instruments. Due to their high-risk and high potential returns, only high net-worth individuals and institutions invest in them. Unlike mutual funds, these funds do not have to register with SEBI or disclose their NAV (Net Asset Value).
A hedge fund can invest in all sorts of asset classes, including stocks, bonds, derivatives, currencies, futures, options, convertible securities, real estate, etc. These funds strive to ‘hedge’ risks against market fluctuations. They tend to employ substantial leverage, holding long and short positions in listed and unlisted securities.
Hedge funds require a lot of active management by fund managers. They have almost complete discretion in choosing the portfolio composition and investment strategies. This allows highly skilled fund managers of the best hedge funds to quickly respond to market conditions and adjust portfolio and risk exposure.
In India, hedge funds were introduced relatively recently in 2012 under SEBI Regulations 2012. They fall under category III of Alternative Investment Funds (AIF). To qualify as a hedge fund, a fund needs to have a minimum corpus of Rs. 20 crore and a minimum investment of Rs. 1 crore per investor.
There are mainly two types of hedge funds. They are as follows:
Hedge funds are private investments and not open for everyone like mutual funds. Only accredited investors, including financial institutions and HNIs, can invest in these funds. Another important thing to note is that SEBI bears no responsibility for hedge funds.
With a minimum investment of Rs. 1 crore, these funds tend to be on the costly side. Hence, only HNI and institutional investors with considerable surplus funds and risk appetite can afford them. They also come with a high expense ratio and taxation. This is because investors will have to consider all costs before investing.
Regular small investors cannot invest in these funds. Instead, they can consider cost-effective options such as the Navi Nifty 50 Index Fund. It lets you invest in the top 50 Indian companies with one of the lowest expense ratios in its category. Visit Navi Mutual Fund to explore the different options.
*Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
Hedge funds are an investment option targeted towards high net-worth individuals and large institutions. They apply various complex investment techniques, including hedging and arbitrage, to achieve their financial goals. The best hedge funds seek to minimise market risks while aggressively pursuing high returns.
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