Markets
How Normal Investors Can Use the Same Strategies as Hedge Funds
How Normal Investors Can Use the Same Strategies as Hedge Funds
In a Warren Buffett note from 2006, he credits the famous value investor Benjamin Graham as the co-creator of the first-ever hedge fund in the mid-1920s.
“It involved a partnership structure, a percentage-of-profits compensation arrangement for Ben as general partner, a number of limited partners and a variety of long and short positions,” Buffett’s letter says.
That means that hedge funds have been around for nearly a century – and they have almost exclusively existed as a vehicle for institutions and wealthy, private investors.
Alternative Investments
The initial use of the hedge fund was to “hedge” specific investments against the general volatility of the market. Despite this namesake, today hedge funds use a number of strategies to target gains.
While retail investors rarely had access to these types of strategies, today it is possible to buy mutual funds or ETFs that try to emulate similar tactics. These alternative investment funds, or alt-investments, come in mainly two varieties:
Return Seekers: Designed to help boost performance by opening up new opportunities to investment, such as private equity or global infrastructure.
Risk Managers: Designed to help smooth performance when markets turn choppy. Strategies include long/short equity, merger arbitrage, managed futures, and other hedge fund strategies.
Today’s Market
The key here, in our opinion, is that these strategies may allow investors to diversify out of traditional markets such as stocks and bonds.
The timing for alternative investments could be good as well, as the start to 2016 was the worst in history for markets and the average investor already lost 3.1% in 2015.
Although funds specializing in alt-investments typically have significant diversification benefits, they also usually come with higher fees in comparison to more traditional offerings. Investors should weigh the cost-benefit accordingly.
Original graphic by: ProShares
Markets
Visualizing Global Inflation Forecasts (2024-2026)
Here are IMF forecasts for global inflation rates up to 2026, highlighting a slow descent of price pressures amid resilient global growth.
Visualizing Global Inflation Forecasts (2024-2026)
Global inflation rates are gradually descending, but progress has been slow.
Today, the big question is if inflation will decline far enough to trigger easing monetary policy. So far, the Federal Reserve has held rates for nine months amid stronger than expected core inflation, which excludes volatile energy and food prices.
Yet looking further ahead, inflation forecasts from the International Monetary Fund (IMF) suggest that inflation will decline as price pressures ease, but the path of disinflation is not without its unknown risks.
This graphic shows global inflation forecasts, based on data from the April 2024 IMF World Economic Outlook.
Get the Key Insights of the IMF’s World Economic Outlook
Want a visual breakdown of the insights from the IMF’s 2024 World Economic Outlook report?
This visual is part of a special dispatch of the key takeaways exclusively for VC+ members.
Get the full dispatch of charts by signing up to VC+.
The IMF’s Inflation Outlook
Below, we show the IMF’s latest projections for global inflation rates through to 2026:
| Year | Global Inflation Rate (%) | Advanced Economies Inflation Rate (%) | Emerging Market and Developing Economies Inflation Rate (%) |
|---|---|---|---|
| 2019 | 3.5 | 1.4 | 5.1 |
| 2020 | 3.2 | 0.7 | 5.2 |
| 2021 | 4.7 | 3.1 | 5.9 |
| 2022 | 8.7 | 7.3 | 9.8 |
| 2023 | 6.8 | 4.6 | 8.3 |
| 2024 | 5.9 | 2.6 | 8.3 |
| 2025 | 4.5 | 2.0 | 6.2 |
| 2026 | 3.7 | 2.0 | 4.9 |
After hitting a peak of 8.7% in 2022, global inflation is projected to fall to 5.9% in 2024, reflecting promising inflation trends amid resilient global growth.
While inflation has largely declined due to falling energy and goods prices, persistently high services inflation poses challenges to mitigating price pressures. In addition, the IMF highlights the potential risk of an escalating conflict in the Middle East, which could lead to energy price shocks and higher shipping costs.
These developments could negatively affect inflation scenarios and prompt central banks to adopt tighter monetary policies. Overall, by 2026, global inflation is anticipated to decline to 3.7%—still notably above the 2% target set by several major economies.
Adding to this, we can see divergences in the path of inflation between advanced and emerging economies. While affluent nations are forecast to see inflation edge closer to the 2% target by 2026, emerging economies are projected to have inflation rates reach 4.9%—falling closer to their pre-pandemic averages.
Get the Full Analysis of the IMF’s Outlook on VC+
This visual is part of an exclusive special dispatch for VC+ members which breaks down the key takeaways from the IMF’s 2024 World Economic Outlook.
For the full set of charts and analysis, sign up for VC+.
-
Money6 days agoCharted: Which Country Has the Most Billionaires in 2024?
-
Energy2 weeks agoRanked: The Top 10 EV Battery Manufacturers in 2023
-
Countries2 weeks agoCountries With the Largest Happiness Gains Since 2010
-
Economy2 weeks agoVC+: Get Our Key Takeaways From the IMF’s World Economic Outlook
-
Demographics2 weeks agoThe Countries That Have Become Sadder Since 2010
-
Money2 weeks agoCharted: Who Has Savings in This Economy?
-
Technology1 week agoVisualizing AI Patents by Country
-
Economy1 week agoEconomic Growth Forecasts for G7 and BRICS Countries in 2024