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Pensions needed to reach for yield with the fed funds rate scraping zero for the better part of a decade. > Pension funds should have steady, modest gains year
by 1001101 8y ago
Pensions needed to reach for yield with the fed funds rate scraping zero for the better part of a decade.
> Pension funds should have steady, modest gains year over year and minimize risk of dips as much as possible.
This is what hedge funds were built for - hedging.
- DSingularity 8y agoWhat? No. Hedge funds are named for making highly risky investments. The short term risk of doing this is offset by hedging across markets and by using specific investment products. Works great until events like the housing market cause a market wide collapse and kill your hedgefund. Whoever concentrated the money in such funds was likely corrupt, otherwise grossly incompetent.
- mruts 8y agoDo you work in finance? That's just not true at all. Hedge funds are a very diverse group (see my above comment about how they are defined by compensation schemes nowadays and not strategies). The original idea of hedge funds was to provide low volatility (like bonds) and high returns (like equities).
- seanhunter 8y agoI believe they are actually so named because the instruments they originally invested in (primarily derivatives) had previously been for hedging positions in cash markets (ie markets on the underlyers) and "hedge funds" were the first funds that just used these "hedge instruments". They always used them primarily for speculation though, not primarily hedging.