ALTERNATIVE INVESTMENTS

Aside from equity and fixed-income investments, there is a broad category of investment opportunities called “alternative investments” — hedge funds, real estate, and private equity, among others — that tend to be less liquid than stocks or bonds. The proportion of institutional funds invested in alternatives has grown as investment managers seek to spread risks and enhance returns.

 

Many dream of becoming star hedge fund managers — outperforming the market, earning hundreds of millions of dollars, and basking in the prestige that comes with it. In reality, few make it big. The hedge fund industry is one of the toughest areas in the investment industry to break into. Successful hedge fund managers distinguish themselves by their exceptional ability to deliver higher risk-adjusted returns to investors than traditional managers. To accomplish this, they must have solid investment and risk management strategies to outperform the market. But equally critical is their ability to raise funds and market their product, which requires establishing and maintaining relationships with high-net-worth individuals and institutional investors.

 

Some institutions take a fund-of-funds approach to investing in hedge funds, in which they invest in a portfolio of different hedge funds to broaden exposure and manage risks. A fund-of-hedge-funds manager selects hedge fund managers and constructs portfolios based on those selections. Aside from managing hedge funds, finance professionals may work in this industry in areas such as analysis, risk management, compliance, and sales and marketing. Hedge fund managers must have strong quantitative and analytical skills, as well as excellent sales skills to market the fund and raise capital.

 

NEWS:

Hedge funds lag S&P 500- http://www.usatoday.com/story/money/markets/2013/11/11/hedge-fund-performance-lags-sp-500/3499623/

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