Every cloud's silver lining

As hedge funds seek out the lesser-used niches to make money, Diven Chatrath explains how the growing market for weather derivatives works, and how hedge funds can get involved, to their profit

Hedge funds are portrayed as complex; but their motto of investment is straightforward, 'positive returns,' come hell or high water.

There are various strategies to generate these returns but if they can be generated with a low correlation with the major markets, better diversification can result for investors in these funds as can an improvement in the risk-adjusted returns of their portfolio.

The market for catastrophe (CAT) bonds was first developed in the wake of reinsurance capacity shortage