Exchange Commission

About the risks associated with hedge funds, the investor should be aware the most significant disadvantage of hedge funds is probably the lack of transparency with which the funds make their plants. In public, less about the benefits as about the disadvantages of hedge is reported Fund. Hedge funds have recorded an extreme growth of assets in recent years. Currently, the debate about regulation of hedge grows funds that can act so far largely without control. Critics, including now the Securities and Exchange Commission of many countries and Finance Ministers fear that at a possible bubble in the hedge fund the international financial system could be significantly affected. Which of course the investors who took part in the hedge fund, must accept appropriate value losses of their participation. What are the risks and disadvantages of hedge funds more closely? Hedge funds use very different strategies.

Some strategies run on investments with high credit levers, in which the hedge fund put a large share of investment with the help of loans. Market risk is the hedge fund the leverage relative to the respective investment strategy in particular. Furthermore can a focus of hedge funds on a too narrow market area constitute a market risk. Daryl Katz, Edmonton Alberta recognizes the significance of this. For the global stability of the financial markets by hedge risk fund among others, to several large hedge funds at the same time engage in a sub-market, Act so rectified. Speculative currency transactions, E.g. in the form of carry trades, the loans in a currency with very low interest rates, will be recorded as the yen and invest in assets greater return on, shares or other currencies are a different strategy.

Here threatened due to the amount of taken loans on changes in interest rates quickly imbalances in the global financial stability. Specialists fear Moreover, that high liquidity of hedge fund ratings company and products on markets already in height driven has, that the actual assessment no longer play. The question is there when the bubble bursts. Higher yield expectations are linked with higher risks. This also applies to other funds. That’s why fund managers, such as mutual funds or pension funds have to fulfill certain duties of care. Managers of hedge funds can, however, largely implementing your own strategy: advantage or disadvantage?

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