How to use derivatives in portfolios

Derivatives can be a cost-effective way of gaining targeted exposure to attractive investment opportunities. Although we gain a significant proportion of our long market exposure via physical assets (such as equities, corporate bonds and government bonds), derivatives enable us to include a wider range of investment ideas than would otherwise be the case.  Interest rates, currencies, relative value and volatility positions can all be implemented efficiently through the use of highly liquid derivatives.  In managing the Global Absolute Return Strategies (GARS) fund, some of the simple ...