The Hedge Funds Book How to Invest in Hedge Funds AND Earn High Rates of Returns Safely by unknow

Author:unknow
Language: eng
Format: epub
Tags: hedge funds, invest, investing, investment, mutual, money, finances, affluent, high return, risk, maximize, hints, tips
Publisher: Atlantic Publishing
Published: 2013-03-27T00:00:00+00:00

Event-Driven Multi-Strategy

The event-driven multi-strategy allows the fund manager a great deal of freedom in determining the best way to achieve returns. The manager can exploit risk arbitrage and distressed securities as well as make investments on the basis of general news and economic indicators. In each case, anticipation of the market moves in response to the news gives the big shift needed for good returns. The manager’s duty is to stay on top of possible happenings, try to anticipate major shifts, and be sure the fund is positioned to react the moment news is released.

It seems new economic figures are announced almost every day, and the manager must be experienced in determining which ones are important in moving the market and which may be ignored. Certainly some are more significant than others. The market tends to predict and anticipate figures before they are announced, so sometimes the values move in the direction you would not expect when the news is announced.

One major indicator for the health of the country as a whole is the GDP. This is a measure of how fast an economy is growing, as it totals together the values of all the goods and services made in the country. As this is the product, there is no accounting for whether the goods have been sold or are just languishing in storage, as for example, some gas guzzling cars were during the 2008 gas price surge.

Sometimes, an increase in this indicator is also used to imply a country’s production is increasing. This is not necessarily correct, because the GDP includes services which may not reflect any added value, but merely involve shuffling money around, for example in service industries.

The GDP is made up of four components. First, there is the measure of how much consumers are spending, known as personal consumption expenditures. The second component is the government’s consumption expenditures, which includes the amount spent by local, state, and federal governments on programs and investing. The third factor is the measure of investment by private domestic companies. This would include items such as equipment, plants, and real property. The last major component of the GDP is the net exports. These are the difference between what is exported to other countries and what is imported from them.

Another economic indicator to watch is the Consumer Price Index (CPI). This may be one of the most important economic indicators for several reasons. It is used to make adjustments to many items, such as pensions and Medicare, and is watched by the Federal Reserve when considering interest rate changes.

The CPI is actually a set of numbers, which look at the prices consumers have to pay for various items. The core figure is considered a benchmark in determining inflation in the economy and is based on the total price of a collection of goods a typical consumer might buy. Some of the figures given discount the price of energy and food, so the numbers are subject to some interpretation in determining the effects of inflation on the populace.

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