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Alternative Market Briefing

Hedged mutual funds (HMFs) may be a dominant trend in next hedge fund industry cycle - Part Two

Friday, July 31, 2009

By Benedicte Gravrand, Opalesque London:

This is the second of a two-part article. Part One was published yesterday and can be found here Source

What are HMFs? According to the Lake Partners report, hedged mutual funds are open-end investment companies registered under the US Investment Company Act of 1940 which implement their underlying portfolios using hedging strategies or investments on an ongoing, regular or periodic basis. Although open-end mutual funds are not the only ones in the game: registered closed-end funds, ETFs and ETNs also use these strategies.

Strategies include long/short investing, hedging (options, futures, derivatives, etc.) and alternative strategies (commodities, leverage, derivatives, illiquid private placement or distressed securities and other instruments).

Hedged mutual funds provide access to alternative strategies with lower costs, more oversight, and better liquidity and transparency than hedge funds, says the report. Their regulatory safeguards include independent custody, limitations on leverage, liquidity and daily pricing, and lower costs.

Investing in HMFs These funds indeed offer an opportunity for investors and professionals to have greater choice, additional sources of potential returns, more tools for risk management and enhanced diversification.

Those driving the current and f......................

To view our full article Click here

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