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Fund of hedge fund - diverse way of fund management

Author: Paul Malot
by Paul Malot
Posted: Feb 08, 2015

Everybody wants increase the wealth they possess by investing in the right instruments. You can make safe investments in financial institutions or you can take some risks and earn larger profits from mutual funds and equity funds. A hedge fund is multi-faceted, i.e., your money is invested in a number of diversified assets for higher returns. An experienced hedge fund manager or quant well versed in quantitative analysis that is based on mathematical and statistical knowledge will help minimize your risk. Fund of hedge fund is where various investment strategies are implemented to widen the scope of maximum return. The main objective is to expose your base investment to a number of portfolios so that return earned by you is highest and exposure to risk is minimal.

Fund of hedge fund is quite complex for any inexperienced fund manager but those specializing in fund of funds know how to diversify your initial investment. In case of single hedge fund the initial payment has to be large as the number of partners is limited. But, in case of fund of funds your investment is exposed to some of the highest rated portfolios. Your efficient portfolio manager will do it on your behalf. The portfolio manager will keep your interests in mind and make an effort to reduce the risk factor associated with market-based investments. A quant will perfectly analyze the risks and gains associated with each portfolio.

Aim of hedge fund is to evenly spread out the investment return for the customer irrespective of how the market performs. This is where ability and experience of portfolio managers come into play. Experts in fund of hedge fund will advice you whether it is suitable to diversify into fund of funds. They will thoroughly explain all the fundamentals of fund of funds and satisfy your query before diversifying your money. Main job of a quant is to analyze financial prospect of any investment portfolio, examining the risk associated and continuous assessment of how the funds are performing.

Quants are experts in mathematics and statistical tools and are favoured by all large investment institutions. They work in collaboration with portfolio and asset managers, providing them guidelines and detailed reports. Job of a quant is diverse today and include financial research, systematic trading, risk management, option pricing and quantitative programming. They are essentially skilled in data science, software development and are easy with numbers. When investing in fund of hedge fund you need an experienced portfolio manager who can explore and find out the best performing funds. They do so by surveying the history of the funds before shortlisting them.

A major benefit of investing in fund of hedge fund is to reduce your risk as your money is spread among a number of funds instead of limiting it to a single fund. Some expert fund managers will invest your money in single fund but offer you shares at lower than first investment made. You must clearly understand the fees you have to pay for fund of fund which may be higher than normal hedge fund. Services of a quant are vastly required for hedge funds where statistical coding is required to recognize the performance pattern of funds.

Resource Box: Expert quants will provide wise investment solutions for you. Leading fund of hedge fund investment will increase your asset value in manifolds.

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If you are planning to go out with your friends for your birthday or to just have an unforgettable party with them at the end of a long week, then you should take into consideration doing something different and extraordinary this time.

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Author: Paul Malot

Paul Malot

Member since: Jun 26, 2014
Published articles: 696

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