Financial markets around the world have been a quivering mass of uncertainty of late. In particular, equity markets. It has been quite the norm the past month for the Dow to lose 2% in one session only to recover the losses the next day.
Here in Asia, the swings have been even more extreme, for example, South Korea’s KOSPI plunging by 6% for the day, only to make up for it and then some the following week.
Traders and seasoned investors aren’t sure whether to laugh or cry over this state of affairs. What more, the ordinary Joe who is not even sure what he’s invested in. I asked my uncle (he works for a major airline) the other day where his savings were invested. His answer, “Oh, in some pension fund and insurance.” Yes, but what was the pension fund invested in and what sort of insurance? He didn’t know.
The reality is, that many people do not understand financial markets or the services and products they provide. Instead, these people choose to do what the majority of investors across the globe do – put their money in large institutions like pension funds, mutual funds and insurance companies.
Now, have you ever wondered how these funds and companies invest the capital they have? Many a time, these institutions in turn, invest in and/or through other entities like hedge funds and mutual funds.
So, you put your money in say a pension fund that promises to grow your wealth so that you can retire comfortably, but you’re not quite sure what you’re invested in. The fund in turn gives your money to another fund that invests it in stocks you’ve never heard of. Have I confused you enough yet? Well, for this week’s A Fund Affair, I thought it would be ‘fun’ to take a look at a fund that services only institutional investors.