How Do Hedge Funds Make Money in Bonds?

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Hedge funds make money in bonds by separating treasury bills for a higher profit, creating better leverage for the bond investment or getting better loan rates on bonds. Get a higher after tax rate of return on bonds through hedge funds with information from a financial consultant in this free video on investments.

Part of the Video Series: Investment Tips & Financial Planning
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Video Transcript

Have you decided that you're going to invest in bonds and you're going to do so through a hedge fund? Hi this is Roger Groh at Groh Asset Management. Today we're here to talk about how hedge funds make money in the bond market. Well if you're a small retail investor and you've been out buying treasury bills and holding them until they mature, you're at one end of the investment spectrum. On the other end would be a hedge fund investor. And a hedge fund investor can take that same treasury bill and change it dramatically. For instance, they can separate the interest payment in the bond from the principal part and the breakup value being higher than the combined value, sell them and generate a profit. A hedge fund may be able to leverage more that actual bond investment then you could depending upon the type of account that you have. In addition, the hedge fund if it's large, may enjoy better loan rates then you do and therefor net a higher after tax rate of return then you are today. I hope that helps, I'm Roger Groh as Groh Asset and thank you very much for spending time with me.


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