U.S Cross Asset Fund

U.S Cross Asset Fund
Name
Institution

U.S Cross Asset Fund
A cross-asset fund is a group of asset classes combined and utilized as an investment. These asset classes may take the form of equity, bond or cash. It makes up a multi-asset class investment where more than one assets are involved hence a group of assets. One fund that is common in the United States offering financial performance is the Growth Fund of America. This is one of the managed funds that have about 65% of the assets invested in a joint stock where about 25% of it is global. This fund has a history of compelling investors and managers for it is a good deal. Its key objective is to provide people with the growth of capital for businesses and is very flexible to venture into investments provided there are best opportunities for growth. The Growth Fund of America invests in the government securities of the U.S, cash equivalents and bonds.
How Derivatives are Used to Hedge/Generate Performance
In scenarios where investors are exposed to a wide array of changing risks, derivatives are used to manage such risks in a business organization (Maguire, 2005). Markets to do with derivatives have experienced growth regarding securities that are at the disposal of traders. Performance generation includes how to manage the risks effectively. The common derivatives with the Growth Fund of America include the future contracts, swaps, and options.
Future contracts are standardized contracts that can be traded on an exchange between two parties to engage in a trade of some specific asset of a particular agreed-upon price on a future date.

In generating performance, this gives an organization ability to purchase materials or even services and make payments at a later date. It helps investors have value for their assets while guaranteeing the value of their payments and receipts. This is achievement reached through the use of commodity futures and or financial futures. Companies can sell their future bond contracts at current prices to lock in the current yields. Enterprises can settle future payments of interests through future agreements which fund increases in the payable interests.
Due to their flexibility, derivatives are good risk management tools. When risks are well managed, there is always a good performance. Derivative, therefore, takes care of uncertainties that may arise in case actual returns of investments do not materialize as expected. Swaps are used to reduce risks by simply matching its liabilities and assets. They allow for the exchange of several payments in one currency for other many payments in another currency.
There is an aspect of debt reduction which derivatives help achieve. Businesses thrive because of borrowing here and there to have a starting capital or in a way boost the production and stock of a business. Derivatives reduce the burden of debt by enabling companies to borrow in a way that involves lower costs of finance by swapping cash flows hence generating performance.
Using Derivatives to Hedge Events
There are events which are set to be accompanied by a lot of risks such as elections. Derivatives, in this case, are used to hedge the exposure of finance. It aims at reducing or sometimes doing away with all the risks associated with an event (Maguire, 2005). If an event might adversely affect the market and the economy in general, there need to be regulatory efforts to deal with such. Derivatives can be used to hedge event, for example, the Donald Trump Election. Derivatives can be used to allow participants in the market to share risks among them to allow those exporting to fix prices even when the exchange rates keep fluctuating. The banks, on the other hand, should be in the position to offer mortgages with fixed rates irrespective of the changes in the rates of interest.
Trump was expected to deliver as per his campaign strategies, but there was a risk that he might fail to keep to his word; something that will be a big blow to the Americans. There was a threat that the United States international leadership might move away from globalization, free trade, and open markets. Perhaps none could probably tell the future about the new regime dynamics in global economic management. These changes might turn out to be negative to uprising economies and multinational companies. As an asset manager, I will use the derivatives to explore strategies that will accommodate all these risks in case they occur.
The American economy is close to full employment. The Trump election could hike public spending and enact huge taxes which are a sign of inflation and higher rates of interests. This might cause a disruptive effect on financial markets while accelerating inflation. The American dollar is already valued highly, and any attempts to strengthen it will contribute towards inflation. Derivatives can be used to hedge inflation through inflation-linked bonds. As an asset manager, I may decide to use inflation derivatives which will transfer inflation-related risks between two counterparties. Asset swaps may also apply in this case as linear forms of the derivatives.
Hedging Uncertainties in 2017
The beginning of 2017 is set to mark a lot of dynamics in the economy especially in marketing policies. There are so many uncertainties being expected so far as the new regime comes in. The nation may incur a lot more risks in the normal running of businesses due to such policies which will not be accommodative investors and asset managers. The year is stereotypically political globally. This means the political events may stagger the economic system in one way or the other (Maguire, 2005).
There are strategies that are needed to be employed to cater for the uncertainties. The success of these strategies to effectively manage the risks and uncertainties depends on how best they will be modified. Benchmarking is the first weapon. It is something that firms need to undertake if they do not want the risks and uncertainties interests to affect the decisions of what the entire firms produce and sell. There should be financial hedging where the firms shall not be so much sensitive to the dynamics evident in the risk factors. For the firms experiencing lower outcomes and considering them as points of concern as a result of uncertainties will need to employ the strategy of financial hedging (Maguire, 2005). Asset managers need to do everything in their power to eliminate the expensive lower tail outcomes which pose a serious impact on the value of the firms.
Future price + expected basis = expected price
The transaction can look like this
Cash market Future market basis
June Received cash forwarded(June) bid $1.18/gal Sells in July at $1.28/gal -0.10
July Sells cash @$1.15 in the spot Buys in July @$1.12/gal -0.05
The results indicate that future market in July was at $1.15 it gained cents on the future position; thus the commodity sold will be $1.23.
Flexibility is another way to counter uncertainties. Firms need to adapt to a system where it can adjust to changes without feeling financial adversities (Maguire, 2005). In other words, asset managers need to ensure profits increase whether in the conducive or non-conducive environment. This can be achieved through production possibilities and marketing strategies such as changing pricing rates.  

Reference
Maguire, F. (2005). Derivatives Regulation Cross-asset trading and risk management. Derivatives Use, Trading & Regulation, 11(3), 263-267.