Diversification in Hedge Funds and Venture Capital

Data of some of the largest hedge funds was released by Hedge Fund Research where Bridgewater reported gains in 2018, amidst economic slowdown. The growth by the company outperformed major indexes in different asset class and finished returning 14.6 per cent, whereas, on an average, hedge funds lost by 2 per cent in the year through November. Wellington Fund reported gains of over 9 per cent and global equities were able to provide returns of, approximately, 6 per cent. D.E. Shaw returns from Composite funds was 11.2 per cent in 2018, RIDGE Fund gained 10 per cent and Millennium Management gained approximately 5 per cent. The data depicted almost every asset class in red in the year including the S&P 500 that declined by 7 per cent (without dividends). 

This was overall a tricky year for most hedge fund managers where most of the equity oriented funds provided unsatisfactory results. 

Basic Investment Ideas in Hedge Funds

Hedge funds can provide consistent returns, irrespective of, other market factors (e.g. supply / demand, economy, trade, geopolitical factors etc.) as the managers invest in a variety of assets to generate the anticipated returns. These are also called targeted absolute return funds.

Investors can buy in private companies, where the money can be invested by private equity fund managers who can pick companies to invest, depending on various statistics and results delivered by the companies. Fund may charge fee for their services, and even receive a share from the profits. 

Investors can buy in venture capital, where shares of private companies are bought, that are, mostly start ups with a potential to grow in future. These can be riskier but if the company grows, shareholders are benefitted.

REIT offers way to buy in real estate, where the properties can be rented or leased out by the investors.  

Commodities and forex also provide alternative ways to earn. One can buy physical commodities such as gold or silver, or get shares of mining companies or ETFs. Investors can buy in futures. These also include agricultural commodities and the price of these is not influenced by stock market performance.  

In 2008, after the recession, a number of other ways to invest were developed such as Bitcoin / Crypto currencies.  Investment in renewable source of energies such as solar panels, wind turbines, battery and other energy sectors grew. Other changeable and uncharted areas include entertainment business, mobile gaming, software applications and music industry. 

Many high net worth investors buy rare luxurious items, also called items of passion. These are collectibles and some of the categories of collectible include wine, jewelry, coins, stamp, cars, artwork etc. Its price is determined by many different factors, but, typically, by rarity and historical values. Most such investments offer uncorrelated growth and portfolio diversification, where the alternatives can spread the risk out and provide layers of protection against market volatility. The value of these assets is not determined by markets but there are various other risks, and the law of supply and demand prevails. 

To find out more about hedge funds investment, check 99 Alternatives at (http://www.99alternatives.com).