Hedge-Like Mutual Funds Flourish

Mutual funds are utilizing popular and successful investment strategies from hedge funds more and more, according to the Economist.   There are three types of mutual funds that show hedge fund like characteristics that Todd Trubey, an analyst at Chicago-based Morningstar distinguishes.   “Market-neutral” funds aim to make money in bad times as well as good; however, Trubey notes that it is hard to squeeze worthwhile returns from such a strategy without the leverage hedge funds have.      The “equity long-short” strategy is much more ambitious and involves bets on the direction of individual stocks. Shorting stocks is a risky game that can have offer huge returns for some or be unsuccessful for others.   Lastly, “funds-of-funds” approach combines a number of strategies in a one product. Several invest in different hedge funds and some mutual fund managers can gain access to unique accounts set up for them special by hedge-fund managers.    However, financial specialty comes at a price and the high fees of hedge funds are seeping into the mutual-fund arena. So far, the specialty products account for a tiny share of the $20 trillion global mutual fund market.   The overlap can only go so far though as the two products appeal and are marketed to different audiences. Mutual funds are heavily regulated and are geared towards retail investors. As hedge funds target the ultra-rich and institutional investors.   The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.