Hedge funds are big business. Although they have yet to filter down to the man in the street (at least in their purest form), institutional investors such as pension funds and insurance companies appear to be lapping them up.
The Bank of New York predicts that global institutional demand for hedge funds will soar from $360bn to over $1trillion by 2010, and high profile launches continue to proliferate.
So are hedge funds really the hottest thing since sliced bread or are they simply a bubble waiting to burst?
And should you be holding this type of investment in your portfolio?
Let’s start by clearing up a common misconception.
Despite the bad publicity surrounding a few higher risk hedge funds that have blown up in the past such as long term capital management, the majority of hedge funds strive to be lower risk investments and deliver positive returns, irrespective of market movements (ie, absolute returns).
