Thepresent market investment strategy uses the hedge funds as theprimary investment approach. The portfolio managers prefer usingthis investment approach as it is available in both long-term andshort-term investment options. In addition, the technique does attainsubstantial gains at moderate risk. Some of the standard instrumentsthat are used in the investment of hedge funds include bonds andundervalued securities. The investment technique has more thanfourteen variations that are all suitable for the modern volatilemarkets as they suppress volatility through preservation of capitaland enhancement of positive returns (Boassan, & Boassan, 2011).
Hedgefunds investment continues to remain a significant investment optionas it decreases market volatility, especially the stock market. Incase the market continues to remain volatile, and the investmentstrategy manages to maintain high returns, the majority of theentrepreneurs will hedge their funds. Consequently, hedging willbecome the dominant market investment strategy over time (Copeland, &Zuckerman, 2014).
Hedgingwill become dominant because it offers investors a wide range ofinvestment methods. Secondly, it decreases the chances of losingcapital. Thirdly, investors hire experienced professionals to managethe capital on their behalf. The managers collaborate with banks, orsometimes create a team of finance professionals, to oversee thegrowth of the hedge funds. Lastly, the growth rate of the hedge fundsis likely to increase at a high rate. Presently, financial analystsestimate that the hedge funds industry is worth about US $1 million.However, the hedged capital will begin increasing at even a higherrate in the future since the majority of the entrepreneurs arelooking for a safe investment option that guarantees high returns atlow risk. Moreover, it supports a variety of international investmentchoices (Mwamba, & Weirstrastrass, 2012).
Boassan,V. & Boassan, E. (2011). Risks and returns of hedge fundsinvestment strategies. InvestmentManagement and Financial Innovations,8(2),110-122.
Copeland,R. & Zuckerman, G. (2014). How individual investors can investlike a hedge fund. TheWall Street Journal.Web. Retrieved fromhttp://www.wsj.com/articles/how-individual-investors-can-invest-like-a-hedge-fund-1407106285
Mwamba,M. & Weirstrastrass, J. (2012). On the optimality of hedge fundinvestment strategies: A Bayesian Skew T Distribution Model. AfricanJournal of Business Management 6(10).Available at SSRN: http://ssrn.com/abstract=2647352