Why do hedge funds use absolute returns?

The adjective "absolute" is used to stress the distinction with the relative return measures (often used by long-only stock funds) that are based on comparison to a benchmark. The hedge fund business is defined by absolute returns.

What is a hedge fund business?

The hedge fund business is defined by absolute returns. Unlike traditional asset managers, who try to track and outperform a benchmark (a reference index such as the Dow Jones and S&P 500 ), hedge fund managers employ different strategies in order to produce a positive return regardless of the direction and the fluctuations of capital markets.

What is an Absolute Return Fund?

As an investment vehicle, an absolute return fund seeks to make positive returns by employing investment management techniques that differ from traditional mutual funds. Absolute return investment strategies include using short selling, futures, options, derivatives, arbitrage, leverage, and unconventional assets.

Why do investors like absolute return strategies?

Investors especially like Absolute Return strategies because they operate independently of market direction, are good in times of market downturns, and help to diversify down the risk of other portfolio investments. For more information on Trend Following strategies please contact [email protected]