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Hedge
funds are making their way into the global financial
world as a new investment avenue. The money invested
in the industry exploits niche profit opportunities
faster (in the emerging markets like India). In the
third quarter of 2005, $1.1 bn flowed into emerging
markets (predominantly into equity hedge, and also fixed
income and commodities). Emerging markets now constitute
5.59% of the $1 tn global hedge fund industry, compared
with 2.93% at the end of third quarter of 2004.
Emerging
markets, particularly in India, are attracting hedge
funds in growing numbers. Industry analysts state that
they have seen a move away from established markets
in equity (buying short) long or short (selling short)
to places like India. Bullish equity markets mean investors
are less prepared to pay high fees charged by fund managers.
Hedge
funds are aggressively managed portfolio of investments
which use non-traditional and advanced investment strategies
such as leverage, long, short and other derivative positions
to offset risk. The aim here is to generate higher returns.
Hedge funds make investments in domestic as well as
international markets. They are more an investment strategy
rather than a separate asset class. Hedge
funds are privately offered and managed investment options,
which are open to a limited number of investors. They
require a very large initial investment amount. Generally,
they operate as limited partnerships or limited liability
companies and they rarely have more than 500 investors
each.
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