What is mutual fund? It is a collection of investment (made possible by many investors) whereby it is managed in a professional manner by experienced money managers. The benefit of such investment is that you can reap the rate of return that comes with it.

Why is mutual fund good for you? Basically, fund managers use the pooled amount of money and spread them across many investment types. Overall, this reduces risks. Your money would not fluctuate much if compared to the stock market.

If you prefer to invest in individual securities yourself, by all means, go ahead. But this often requires experience. For beginning investors, this could be a hard task. Therefore, investing in a mutual fund is the way to go. In fact, when you are investing your hard-earned money into mutual funds, you are actually hiring a professional fund manager for a relatively low cost. Comparing the risks factors and experience, it is sometimes hard to compete with them if you invest in individual securities yourself. (more…)

Whenever Wall Street comes up with a new product it behooves Main Street to be skeptical about the hype. In this article we are going to look under the hood of the latest product to get the UK financial services market in a tizz: the multi-asset fund. Whilst there is nothing new in having a balanced fund of bonds and equities, there are more and more funds being launched that offer access to a broader range of asset classes, including: private equity, commodities, bonds, equities property, and hedge funds. What is also new about these products is the low cost structures that they are being offered in.

Low cost structures have become a reality as the result of consumer demand. After years of being hammered by large fees these have finally come under the microscope as fund values have plummeted. It seems a bit rich to pay someone 3% per annum to manage the dramatic decline of your assets. The advent of Exchange Traded Funds and Exchange Traded Notes are the other driver behind multi-asset funds. Now fund managers can use these listed tools to access a broad range of asset classes. Indeed the Gold ETF is though to have boosted the price in gold as it was formerly quite tricky to invest in without purchasing the physical product. (more…)

Until hedge funds started to become popularized in the late 1990’s we really had a stagnant software market for the sophisticated investor. Since hedge funds tend to push the limits of traditional investing in their pursuit of profits it was a natural extension for them to go looking for new ways to profit and extract alpha or profit.

Over the last fifteen years or so all manner of hedge funds whether they be a global macro trader or a guy doing volatility arbitrage have all built and used more and more sophisticated software and computing power to get more of the ever alluding edge that we all want. (more…)

A client has recently asked me if I could “explain what short selling is and how hedge funds use them. I have heard they are highly risky and I also know of concerns that exist about some of their ethical standards.”

Unlike the simple buying of shares where an investor buys them hoping that they will rise, short selling is a tactic used to make money when a share price goes down. If the price does fall the person who has shorted them gains and vice versa.

So is there a problem? Well, many hedge funds operate at an ethical value I am sure. Personally I don’t use anything unless it is fully transparent. If I can’t see why an investment will go up or down I don’t make the investment. If I make a decision that later turns out to be wrong, I want to be able to still say that I would still have made that decision at the time I invested. I don’t want to be kicking myself because I believed noise and because I made an investment without knowing the details back to front.

Unlike the investment in shares, shorting is much less regulated. An investor investing in a share wants it to go up and everyone investing in such shares will want it to go up. This is good for the economy and the strongest shares do well but shorting is a negative approach which has a negative outcome.

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