For investors who are interested in hedge funds, some of the emerging funds that are domiciled in the Middle East, particularly in the UAE, are worth looking at closely. The reason is that some of these funds are performing very well, especially in European markets. While hedge funds present challenges that are unique when compared to some other forms of investments, the fact that these particular funds are catching attention on the international market make it worth taking the time and trouble to understand exactly what hedge funds are and how they work.

For those who do not have much experience with hedge funds, they are formed as a collection of investments that usually sport a number of positions, ranging from long to short. In many countries, participation in these funds means making a substantial commitment and will often require that the investor leave the investment in place for at least a year. Depending on the quality of the assets included in the hedge fund and how closely movement of those assets mirrors the projections of the fund managers, this type of investment can generate a significant return.

The good news for anyone who can afford to commit to an illiquid investment for a year or so is that several hedge funds based in the Middle East are doing quite well in Europe. The funds involve several different markets, ranging from debt investments to commodities to shares of stock. Since the idea of a hedge fund is to hedge against losses by diversification of the assets, most of these funds will include an eclectic mix of assets, making it easier to still earn returns, even if one or two of the assets do not perform in line with expectations.

An example of a Middle East hedge fund that is doing well is two different fund strategies, known as Rasmala Hedge Funds Strategies A and B. On the European market, the funds have experienced both upswings and declines, but over the course of the current year have posted a net increase. Based in the UAE, there is every indication these funds will continue to produce returns in the coming year.

The influx of hedge funds domiciled in the Middle East into European markets should come as no surprise. Many of them are tightly managed, a factor that can be very important, especially when there are few if any regulatory measures in place in this particular market. In addition, the fact that the funds are typically very well balanced, in terms of the types of holdings included in them, make them all the more attractive to investors who can afford the commitment of a large amount of money to a single investment. While there is always some degree of risk, investors who operate in European markets can point to the attributes of hedge funds based in the UAE and other parts of the Middle East as examples of products that present the opportunity for decent returns, while also keeping risk to a minimum.