This page contains a Flash digital edition of a book.
20_20_newsize2 21/11/06 10:36 am Page 15
Should I be putting
some money into
so-called alternative
HSBC Investments
Diversification. Yes, it’s a dull sounding investment term short positions can steady overall investment returns and
but it’s also the reason that investors should always provide a ‘hedge’ against market uncertainty.
consider alternatives. Quite simply, diversification helps
spread risk and can help maximise your chances of For private investors, the most practical way to access the
getting a better return on your money. hedge fund market is through a ‘fund of hedge funds’.
These are funds that invest in hedge funds – typically
People generally invest in alternatives such as hedge holding 10-50 different underlying funds at a time.
funds, property and private equity to gain the benefits of Unlike hedge funds themselves, funds of hedge funds
investing in “uncorrelated” assets. So, what does this are usually more transparent providing regular
mean? Well, even if you’re invested in both UK shares performance data and disclosing charges. And, with a
and overseas shares, you’re still professional fund manager who
primarily exposed to one type of decides which hedge funds to
risk. Stock markets, and bond purchase, a high level of
markets, are more sensitive to diversification, access to hedge
certain news announcements than funds that may be closed to new
alternative investments such as investors, and much lower
property. Hedge funds aim to investment requirements as well as
provide a positive return on your greater freedom for investors to
investment, independent of the move in and out of the funds, they
direction of market returns and can offer definite benefits.
Private Equity provides the
opportunity to invest in the long- PROPERTY
term potential growth of Property can be a great
companies which are not listed on investment. With a 6-8% possible
a stock exchange. yield on property it often provides
the same return as equities, and
In this article we explore each of the structure of property leases
these three alternative asset types means that property still pays out,
and some of the pros and cons for even if equities slump downwards.
each. Property tends to lag behind the
equity market by around 18
HEDGE FUNDS months (either up or down) so any investment in
Experienced investors are often attracted by the fact that property is also a good complement to equity. If you
hedge funds can be very aggressive and therefore have want access to the property market but also need to
the potential to achieve higher returns than ordinary access your money, then investing in a property fund is
investment funds. These investors, however, also have to probably the best way and there are essentially two ways
accept that there is no recourse if an aggressive strategy to do this – directly, and indirectly.
goes wrong. But it would be inaccurate to assume that all
hedge funds are high risk. Many aim to reduce A ‘direct’ property fund physically buys property. For
investment volatility by holding both ‘long’ and ‘short’ example, a fund may buy a collection of large office
positions. Long positions can make money when an blocks or retail developments such as shopping centres.
investment rises in value and a short position can These are considered to be defensive investments in that
generate profits when it falls. Holding both long and in a falling stock market they are likely to outperform
20/20 fourteen
Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44
Produced with Yudu -