![]() ![]() ![]() Leverage is generally described as the use of debt to amplify returns, but at a higher risk profile. Money that ‘sticks’ is most desirable – managers can then concentrate more on managing and spend less time dealing with panicky investors.Įxplore the types of restrictions that impact liquidity by clicking on the drop-down menu below. So, while a CTA/Managed Futures strategy can be characterized as having a relatively short investment horizon, its redemption frequency is not daily. While hedge fund managers can offer a fraction of the wait time compared to their closed-end counterparts, their liquidity terms are still binding in comparison to the traditional mutual or exchange-traded fund. Others will elect for higher restrictions around capital accessibility, by decreasing the frequency of periodic withdrawal and increasing notice periods. Some hedge funds may carve out a side pocket to segregate the illiquid investments from the fund’s liquid securities (offered to subsequent investors on a pro-rata basis). An event driven fund, for instance, would not benefit from the same liquidity provisions as a long/short equity fund. Liquidity was one of the main attractions for institutional investors, especially for those who'd had experience of the exceedingly long lock ups in the private capital world.Ī fund’s liquidity will vary, corresponding with the types of investments the fund manager is pursuing. Implementing new structures was, in part, the industry’s response for the need to align interest with its investor audience. Over time, more and more strategies and fund structures have emerged. The dynamic nature of hedge funds strategies, which we delve into in the next lesson, allows hedge fund activity in basically anything investable. ![]()
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