Why Managed Funds?
Self-trading in the forex currency trading markets is at best a difficult proposition. To be successful, a currency trader must follow market movements 24 hours a day, six days a week.
Many Forex investors do not have the time, experience or desire to trade with this intensity themselves. Managed forex trading accounts were created for investors with risk capital who do not necessarily want to trade on their own.
In a Forex Managed Account the positions belong to your portfolio alone. Unlike mutual funds or hedge funds which commingle your funds with other investors, a Forex Managed Account is in your name and all or part of your funds can be redeemed within one day. There is no lock up period.
The managed forex account only holds your positions and allows you to follow a cost-basis for each of the currencies in your account. Based on your long-term goals, risk tolerance and time horizon, you can select a IronFX UK currency professional with your trading outlook to actively manage your portfolio. Whether you’re interested in a conservative or aggressive forex trade program, you will find the trader who will suit your risk parameters.
Advantages of Managed Funds
Ability to Profit in Rising or Declining Markets: Unlike equity and fixed income managers, a currency hedge fund manager employs both long and short positions with equal facility. When trading currencies, there is no difference in profit potential between a long and short position. Because of this characteristic a currency portfolio is not ‘biased long’ but able to profit under any market conditions.
Global Diversification: The performance of equity and fixed income investments in one country is often highly correlated with the performance of equity and fixed income investments in other countries. As a result, global portfolios composed solely of equity and fixed income investments lack full diversification, even if they are geographically dispersed. Investing in currencies gives investors access to markets beyond equity and fixed income investments, providing more complete diversification and a reduction in portfolio risk.
Reduce Portfolio Risk While Enhancing Returns: When combined with an investor’s existing portfolio of equity and fixed income instruments, managed forex accounts reduce the volatility and risk of that portfolio while enhancing long-term returns.
Risk Control: Investing in currencies incorporates disciplined risk control procedures in order to limit risk and achieve the smoothest possible growth in its investors’ account value. Leverage is an acceptable and useful tool when used judiciously and with strict risk management techniques.
Investors in currencies are therefore able to achieve a high rate of return with a level of risk control that is not possible with traditional “buy and hold” investments. Although returns are far from guaranteed, professional hedge fund managers tend to out perform individual speculators by their deployment of disciplined money management techniques and a system trading approach. Professional hedge funds also tend to use their leverage more judiciously thus avoiding sudden catastrophic losses.
Note of Caution
Some hedge funds may require a minimum lock up period for funds of up to three months, and the more established players may even require more. Large publicized losses at some of the world’s biggest hedge funds are sometimes just the tip of the iceberg.
Many hedge funds which trade risky OTC instruments suffer significant losses from time to time and any investment in these funds should be regarded as extremely speculative in nature. In selecting a hedge fund in which to invest IronFX UK urges the use of common sense. Just because currencies may seem exotic or less familiar then traditional markets (i.e. equities, futures, etc) does not mean that the rules of finance and simple logic are suspended. Any promises of fantastic and consistent monthly gains of 15% or more, for example, are wildly exaggerated and would never be claimed by a legitimate investment manager.
Although some traders do manage to produce some amazing short-term gains the risks taken to produce these gains are enormous and generally mean that even the best-intentioned manager who stretches his leverage beyond prudence is bound to eventually take losses of varying degree.
