Question

Do you believe hedge funds serve a useful purpose? Why/Why not? What are some of their pros and cons?

Answer 1

I do believe that hedge funds are serving an useful purpose because they are providing opportunities for various investors to make a higher rate of return in both rising Markets and the falling Markets and they are only managing their funds like other funds so it is also offering a very higher kind of diversification opportunity and hence they are going to also maintain efficiency in the market by playing upon the discrepancy of the price on the lower side and the higher side.

Advantages of hedge fund are as follows-

A. Hedge fund provide with reduction of overall portfolio risk and volatility in valence portfolios.

B. There is transparency and expert advisory also provided by hedge funds.

C. hedge funds are also helping in making money in both rising Markets and the following markets

D. hedge funds are of an engaging into aggressive investment strategy which will help in making higher rate of return.

E. Hedge fund are also engaging into high degree of diversification.

Disadvantages related with hedge fund are as follows-

A. Hedge fund are generally engaging into risky exposure they can even leading into higher losses and significantly underperform the markets

B. Large investment fees are there in hedge funds which is reducing the profits

C.there is a high degree of standard deviation in return which is exposing the investor to High risk.

D. There is a greater degree of use of leverage in hedge fund also.