This is no more a secret that hedge fund is gaining an incessant popularity due to its diversified nature of investment wherein the investors can invest in the funds consisted of multiple financial instruments including stocks, real estate, bonds and commodities and maximize returns with the use of the most sophisticated tools and techniques. While the primary aim of this fund is to make money regardless the fact that the market goes up or down, the investment managers typically use high-end strategies like leveraging, long/short and derivative positions to generate high profit and hedge probable market risk.

It has been anticipated by many financial experts that by 2025 the Indian economy will become 65 per cent of the size of the US economy. This is majorly due to the initiatives undertaken by the Indian Government. One of the initiatives was taken in the year 1993 when the asset management business under private sector took a root in India with the notification of SEBI. By 2017, India already has much of the institutional framework for hedging, including a regulatory regime and good information disclosure standards.

One of the major advantages or impacts of hedge funds on the Indian economy is that it brings in a welcoming volume which further results in liquidity in the market. Moreover, market liquidity leads to better price discovery in the market.

Due to the aggressive investment strategies used in the hedge funds, investors can borrow and trade money on top of the capital gain. These strategies maximize the hedge fund investment return and at the same time reduce possible associated risk by employing complex risk management tools.

Another great feature of the hedge funds is that a large amount of money can be made by utilizing them within your portfolio. The main aim of the hedge funds is to acquire a high-return despite market fluctuations and the strategy used for this purpose is called a global-macro approach wherein the hedge fund managers attempt to take a large position in commodities, bonds and stocks by foreseeing the possible investment opportunities which one can take in relation to what may happen in the future.

Long/short strategy is another great strategy used by the hedge fund managers wherein they purchase stocks that they feel are undervalued and sell stocks which they deem to be overvalued. In this strategy, the funds usually have a positive exposure to the equity market. For an instance, if 70% of the funds are invested long in stocks and 30% of the funds are invested short in stocks, then the net exposure to the equity market is 40% without using the leverage (their gross exposure would be 100%). On the other hand, if 80% of the funds are invested long in stocks and 30% in short, then the net exposure would be 110%, which indicates 10% leverage.

These are the various hedge fund investment strategies used by the hedge fund managers for generating a high profit and hedging possible associated risks. No wonder this fund is so much in talk among the investors as it can have a great effect on the global economy.