Hedge funds

Care to reveal them for us amateurs?

Yep.

If you are worried that the Stock Market is going to collapse, probably the best option is to sell your holdings, and buy back in when you are more confident.

Purch what is the difference between a hedge fund and an absolute fund?

An Absolute Return Fund is a Fund with a mandate to make a positive (absolute) return in all market conditions. They don't all use derivative contracts, but they can make use of the Ucits III directive for collective investments to do so.

A Hedge Fund is a type of Fund usually open to a small number of high nett worth Investors, and generally are not offered in the retail market. Basically they are private pools of capital, where the manager has an almost open mandate to make money.

They normally have a narrower focus than a retail fund, and as such are generally high risk. The investment manager will usually use various hedge strategies to reduce some of this risk. Hedge Funds are often domiciled Offshore, and are lightly regulated compared to Unit Trusts/OEIC etc etc, especially as there is no compulsion for them to be liquid, in fact most have long tie in's for capital invested.

Other features of Hedge Funds are the performance fees charged my the managers, often 20-50% :eek: and withdrawal and redemption fees.

Morningstar has a micro site dedicated to Hedge Funds

http://hedgefunds.datamanager.morningstar.com/hfsecure/

P.S. Probably the best example of what a Hedge Fund is, would be SAC Capital Partners. They are based in the West Indies, and if you try to find out anything about them and what they do..............................good luck !!!!!

Bit early to say.

It has done well so far, but markets since it's launch have n't been too volatile.

fatheroftwo, you might take a look at covered warrants if you want to make money from falling markets or currency changes. Or to reduce risk from either, at a price.

The Octopus fund so far seems to have done a decent job of hedging the downside risk and at times making significant money during market drops, while Blackrock's UK Absolute Alpha is supposed to be mostly market neutral and seems to have done that as advertised.

Personally I switched most of my money out of the Blackrock fund earlier this year, mostly into pure equity funds, some into the Octopus fund.

Crikey! 5 minutes with Google has given me the answer to my question above!

The bad news about performance fees linked to LIBOR, besides pure cost, is that the manager gets to make money in a rising market just because the market is rising, not because they are doing a better job than others. Rewarding the manager significantly for just having a product available at the right time* isn't a good thing. A relative to peers reward would be a very different matter.

* except for the fund management company, which gets business kudos for good timing of a product launch to milk investors. And for funds where the manager has freedom to choose markets and picks winning markets to be in when there are plenty of losing markets available.