What is a hedge fund?

Answer 1

A hedge fund is like a financial insurance policy. Think of it as a barrier (hedge) or protection against bad things that can happen to your investments. Hedge funds are investments that make money if the market goes down. Sounds strange, but it's true. People that create hedge funds promise to sell the stocks or bonds in the fund at a fixed price at a fixed time in the future and others agree to buy the stocks or bonds at that price, so even if the price of those stocks or bonds go below the agreed upon price, the sale happens at the agreed upon higher price. What they loose in the marke, they make up in the Hedge fund. This is how hedge funds help investors protect themselves against a decline in the value of their investments. Whatever loss they experience as a result of a decline in the financial markets is wholly or partially offset by the increase value of the Hedge fund. Too much Hedging (one to one) results in all market gains being offset by the Hedge. This results in 0% return on investment, which is really a loss because you have transaction costs in purchasing the Hedge and the investment.

Answer 2

A fund that invests in hedge instruments.

Hedge instruments are financial transactions that are developed to allow you to transfer risks/ exposures to other people. E.g. If a British company buys an American plane in USD, to be paid in six months time, the British company has an exposure to the USD for the amount of the plane. They can then hedge their exposure, by arranging a forward exchange contract at a fixed price. The third party will then in six months time sell the British company with USD at the rate agreed upon in the contract.

The British company has thereby "hedged their foreign currency exposure", i.e. they have fixed the price/exchange rate that they have to pay for their USD debt in six months time. (Note that not only are they not exposed to the downside, they are also not exposed to the upside.)

Hedges are therefor primarily a tool that fix certain risks in your business, allowing you to concentrate on your core competencies.

Answer 3

I read all the answers so far and I agree- What is a hedge fund?

Answer 4

One of many different types of alternative investment funds, most of which pursue a total return strategy and usually charge a high performance fee in addition to annual management charges and initial fees. While some funds may pursue conservative or market-neutral strategies, many others take highly leveraged bets on directions of currency or stock movements that are not offset by a corresponding hedged position, making them more speculative and risky undertakings.

Answer 5

http://www.investopedia.com/terms/h/hedgefund.asp

Here's a good link to a definition of hedge funds.

Answer 6

SOMETHING HOMOSEXUALS HIDE BEHIND TO SUCK EACH OTHER OFF.