Of the 132 mutual funds on the market that employ hedging strategies, nearly half have been launched in the past three years, and in light of the 39% average decline in stock funds last year, more are likely on the way, The Wall Street Journal reports.
Some short the market. Others arbitrage or use options, while some adopt an overall absolute-return or market-neutral strategy.
Given the fact that the average hedge fund declined by only 20% last year, some analysts, including Morningstar’s Nadia Papagiannis, welcome the development. “These are strategies that should have been offered to retail investors a long time ago,” she said.
However, investors should be warned that investment strategies in these funds vary widely, they assume additional risk, fees are higher than a regular mutual fund and few have proven track records.
Still, as The Journal put it, “The landscape of hedge-like mutual funds could eventually become as crowded as the actual hedge fund universe.