Over 6,000 hedge funds now trade worldwide overseeing roughly $1.5 trillion dollars in assets. Alternative investment funds can compliment a traditional portfolio of equity and bond funds, particularly during market declines. The advisors used by ENR are regarded as conservative asset managers in the hedge fund complex and use little or no leverage.

What Is an Alternative Fund?

An alternative investment fund is a mutual fund that invests long and short in its respective asset class, or multiple asset classes, seeking absolute returns. An alternative fund is a hedge fund or a diversified managed futures fund.

A global hedge fund will invest most of its assets long or short in large-cap stocks, bonds, currencies and sometimes, commodities. Hedge funds will use leverage to boost returns and are sometimes highly volatile over the short-term; though none of the products in our portfolios are leveraged.

Managed futures funds (Commodity Trading Advisors) trade exclusively in futures and options markets. These advisors have the highest degree of negative correlation to traditional investments amid protracted market declines and have earned superior returns during severe corrections and bear markets. Managed futures trade long and short global stock indices, bond indices, interest rates, currencies and commodities and typically utilize leverage.

Hedge funds today consist of 20 sub-sectors. The most popular of these are macro global hedge funds which trade world stocks, bonds, currencies, and commodities based on a combination of fundamental and technical criteria. Hedge funds range from conservative low volatility products to the aggressive range, seeking higher returns but with accompanied higher short-term risk.

The term “hedge fund” includes a multitude of skill-based investment strategies with a broad range of risk and return objectives. A common element is the use of investment and risk management skills to seek positive returns regardless of market direction. There are two important differences between hedge fund managers and traditional portfolio managers in stocks and bonds. 1) Most hedge funds define risk as a loss of principal, as opposed to the tracking error of portfolios relative to a benchmark. 2) In most cases, hedge fund total returns are primarily driven by specific security decisions rather than the performance of an asset class.