WEST PALM BEACH, FL (www.hedgeco.net) – A growing number of traditional mutual fund companies now offer hedge fund type portfolios according to news reports. Such change in tactics resulted from manyyears of poor market performance by mutual fund companies, following the crash of the technology sector. By contrast hedge funds have basically outperformed mutual funds during the recent equitymarket declines. Rick Lake of Lake Partners Inc, Greenwich, Connecticut said, �Mutual funds lost about $1.4 trillion combined from 2000 to 2002 and because hedge funds engage in many aggressivetrading tactics such as shortselling, they have been able to provide investors with absolute returns in the double-digit numbers.�
Recently more mutual funds have begun to adopt hedge fund type strategies in trading. Mendel Melzer, chief investment officer at the Newport Group of Heathrow, Florida said, “We are likely to be in a low-yield environment for both stocks and bonds.� Melzer further explained that hedge fund strategies such as short selling, derivatives and commodities, offer the hedge fund manager greater flexibility and leeway compared to mutual funds.
Thomas Schneeweis, a finance professor at the University of Massachusetts noted, “One has to look elsewhere.” Part of the reason according to Schneeweis, is that the global financial markets are moving more in sync in recent years, such a trend differs from the realities of a decade ago. Mutual fund companies have diversification needs as well. Such diversification will help the manager to shield the assets of investors in their portfolio.
According to Morningstar Inc., about 120 hedged mutual funds attempt to boost returns and reduce risk, by adopting hedge fund-like techniques. Such hedged mutual funds as Hussman Strategic Growth, Laudus Rosenberg Value Long/Short, Leuthold Core Investment, Needham Growth and Toews Nasdaq-100 Hedged Index, have implemented such strategies with limited success.
As the divide between hedge funds and mutual funds continues to narrow down, expect to see more hedge mutual fund companies competing with hedge funds on their home turf.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net
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