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By Grant Hogan, 3 October 2013
Grant Hogan, research analyst at Blue Ink Investments – a Sanlam Investments company – says, “Like unit trusts, hedge funds offer exposure to all asset classes, but because they are less regulated, they allow managers the freedom to short stocks and use derivatives to exploit investment opportunities. And because of the freedom hedge funds enjoy, they can be used to invest in a wider range of instruments than traditional investments.”
He said choosing the right fund is critical. “Some hedge funds pursue aggressive strategies and can take on substantial risk while pursuing high returns, while most may have a risk profile equal to or even lower than the typical long-only fund. These funds aim to provide stable returns that display a low correlation to the rest of the market. It is very important to understand the specific hedge fund you want to invest in and select a trusted manager.”
Here are Hogan’s top 10 tips for choosing a hedge fund: