Hedge fund is basically an investment partnership which aims to maximize the returns of the investor and eliminate any kind of risk. Hedge funds are known to have investment latitude which is wider in which one can invest in anything like the currencies, real estate or alternative assets. They are also often known to employ leverage by amplifying their returns. Although these are similar to mutual funds, but these are considered to be more risky and exclusive.
Now many market analysts and experts have predicted the arrival of a bear market which was long gone also see the possibility of a looming recession. And to make things worse, hedge funds are thought to be leading the trend which surely is not a good sign.
Now Hedge funds are seen as a contributor to prolonged sell off of the stocks s many of these funds are being invested in the market of the US. Also in the S&P market it has been found that the long short equity hedge fund has suddenly dropped at a significant rate although it was high in the month of October. In recent times it has been seen that the hedge funds have not been justifying their title of fleeing stocks as their rate seems to have slowed down in the recent times. Also some expert suggests that there has been a positive correlation in the returns which clearly means that the exposure hasn’t been reduced yet even though there is volatility.
Now in recent year so many investors have faced different sorts of barriers in order to generate returns that are positive. To add to this, hedge funds have adopted several measures which are both cautious and innovative. Especially the year 2011, proved to be the worst year for the hedge funds. Now due to the increased risk in the market across the entire industry of hedge fund the managers of the hedge funds have started to tend towards the stocks leaving the hedge funds behind. In the month of September previous year, it was found that the hedge funds managed to touch a record of high exposure to the S&P.
Now the growing tensions between the trade market of US and China have led to the falling of stocks in US in the last several weeks. The other reasons of falling of stocks are the increased skepticism. Now with so much happening in the market, only time can tell about the manner in which the hedge funds are going to react to the sudden shift in the S&P’s future strategies. This is because at present time the comprehensive data which is required to determine the fun equities holding are still not available.
Now according to some other market experts the market capitulation is nothing but an indication of the downturn which ha possibly reached its lowest peak. Nut again as the sellers sell their own holdings buyers find this as an opportunity to buy stages at better prices. But again it is said that if the hedge funds hold equities for a longer duration, chances are that the downturn may also become lengthy.
Thus it can be clearly seen that even if these type of funds are going to be sold or not, they are going to affect the regular investors in one way or the other.