What is a hedge fund and what regulations govern them??

Question

These mysterious entities of high finance that enable leveraged buyouts and also 'buy' profitable, debt-free companies by loading them with debt, how do they operate?? How do you define the term 'hedge fund'?? Are they regulated by the Securities & Exchange Commissionn (SEC) on the USA and by the Financial Services Authority(FSA) in the UK?? How come they are allowed to conduct asset-stripping raids on solvent companies with such impunity.??? Are ther no limits to what they are permited to do??

Answer 1

Generally, a hedge fund is a lightly regulated private investment fund often characterized by unconventional investment strategies and often making use of legal structures (sometimes offshore) to mitigate the effects of local regulation and tax régimes. In contrast to regular investment funds, which are usually limited to only being able to "go long" (buy) instruments such as bonds, equities or money markets, hedge funds also have the ability to "short" (sell) instruments which they believe will fall in price. In this way, hedge funds are able to create more complex investment structures which can, for example, profit in times of market volatility, or even in a falling market. They are primarily organized as limited partnerships, and previously were often simply called "limited partnerships" and were grouped with other similar partnerships such as those that invested in oil development. Hedge funds are normally open to business and institutional investors only.

In recent years, HM Revenue and Customs, formerly Inland Revenue, has adopted interpretations of the tax laws that seem likely to keep many funds offshore. One change was in June 2005, The United Kingdom's Financial Services Authority published two discussion papers about hedge funds -- one concerning systemic risks, the other on consumer protection. Due to the same concerns, later in the year the FSA created an internal team to supervise the management of 25 particularly high-impact hedge funds doing business within the UK.

Answer 2

Hedge funds are investment funds which hedge their positions by taking short positions - ie selling stock they do not have. They are extremely volatile and therefore are only able to offer their produts to sophisticated investors - ie usually very wealthy individuals who have prior experience of investing in this type of product.
Whilst the funds will tend to be offshore (Bermuda, for example), and therefore not regulated by the SEC or the FSA, the managers who run the funds will be regulated by their local regulators - such as the FSA, in their capacity as manager. The FSA has indicated a growing interest in hedge funds, so whilst they are unlikely to be directly regulated any times soon, things are getting interesting :)

Answer 3

1) A Mutual Fund that can short stocks. (Mutual Funds cannot short stocks)
2) Hedge Funds are not regulated by the SEC or any other Government Agency.
3) There is nothing wrong if you want to buy a used car for $1,000.00 to sell it on $2,000.00 by pieces.
4) They just buy and sell money. It's not like they are selling slaves or drugs or weapons of mass destruction. They do everything as long as it's legal.

Answer 4

hedge funds r funds that are alowed to take on alot of risk

they can go long or short the market where other funds can only go long

Answer 5

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Answer 6

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