what is hedge fund?

Answer 1

In their original conception, a hedge fund was essentially a fund that sold some stocks short, and bought other stocks (long). With this technique, the overall value of buying and selling balances out, thereby eliminating heavy losses due to large market swings; profit gains in a hedge fund rely on the choosing of appropriate stocks and acting on them at the most opportune moment.

The first hedge fund was created by stock pioneer Alfred Winslow Jones. Jones also used borrowed money to inject his funds with additional capital (leverage), and charged an incentive fee to his customers to place their money in his fund.

Hedge funds have evolved to include a number of strategies, in addition to the balanced short-long strategy of Jones. For the most part, the term hedge fund now refers to any mostly unregulated fund using unconventional methods of investing. Some common hedge fund strategies include: trading stock options and bonds, the purchase or sale of highly undervalued securities, and arbitrage. Most hedge funds also have the status of partnerships, rather than the corporate model of other funds.

A common hedge fund strategy is buying shares in a company that is in the midst of a merger and acquisition — in this case there is a guaranteed profit if the merger does complete, with the only risk being that the acquisition will fail. This strategy, often used in tandem with selling shares of the company doing the acquiring, is known as risk arbitrage.

Unlike mutual funds, hedge funds are very lightly regulated, and so can keep their actions relatively secret. Most contemporary hedge funds are handled by offshore companies in places like the Virgin Islands or Cayman Islands, where regulation is minimal. This secrecy makes it difficult to predict actual numbers for hedge funds, but estimates for 2003 were over US$650 billion under hedge fund management.

In order to keep regulation very low, hedge funds have the status of unregistered investment companies. This means that only accredited investors and qualified purchasers may invest in them — those who have incomes of over $200,000 per year or a net worth of over $1 million, or those who already have at least $5 million in investments.

The term hedge fund comes from the phrase "to hedge one's bets", and refers to the practice of balancing out transactions to ensure that no matter which way the market turns, a profit can still be made. It is this which distinguishes hedge funds from a spate of other fund strategies that sprang up at the beginning of the 21st century to capitalize on unconventional methodologies.

Answer 2

Hedge Fund is an aggressively managed fund portfolio taking positions in both safe and speculative opportunities.

Notes:
Most hedge funds are limited to a maximum of 100 investors. And for the most part, hedge funds (unlike regular mutual funds) are unregulated because it is assumed that the people investing in them are very sophisticated and wealthy investors.

Don't be fooled by the name: hedging is actually the practice of attempting to reduce risk, and the main goal of a hedge fund is to get a maximum rate of return, using strategies involving options, short selling, and leverage. On the other hand, because they often use futures, swaps, and arbitrage strategies, you could argue that hedge funds diversify away some of the investor risk of the stock market.

Answer 3

These dfays, a hedge fund is really just a glorified hedgefund that does not need to meet certain reporting requirements under the securities laws, as well as certain investment restrictions.

Traditionally a hedgefund was an instrument that hedged its investments. It is a fudn that tries to bring about positive results regasrdless of market conditions.

Today, they act must like a mutual fund. To maintian theiur status as on unregulated pool of investments, they meet the requirements of Section 4-2 of the Securities Act (usdually falling within the dafe harbore of Red D). Theya re professionally managed. Also, the adviser tends to gert paid, at least in part, based on the performance of the fund.
The reason Hedge funds act like mutual funds is because equity funds have an average return of 10%; witha hedged investment (risk-free), it would be nearly impossible to bring about those same average results. So, to compete with a mutual funds, performance, they act like mutual funds.

Answer 4

Mutual fund is gathering money from diverse human beings to kind a pool. The mutual fund manager is utilizing that pool of money for funding. besides the indisputable fact that, his funding is certain with the help of the regulation in accordance with the outline and the nature of the fund. The element of the fund is illustrated interior the 'prospectus'. Hedge fund manager has his personal consumers. The consumers supply the money to the manager to make investments on their behalf. The minimum quantity is in many circumstances $1M in line with customer. The hedge fund extremely a lot assure their go back, 24% a three hundred and sixty 5 days. The funding isn't regulated. The hedge fund manager can make investments in even if funding motor vehicle he see in fantastic condition, shorting promoting, concepts and so on. Hedge fund is a lot, a lot volatile.

Answer 5

A hedge fund has the ability to go long a stock or short a stock (long means you make $$ the stock goes up and short you make $$ when the stock goes down)

Answer 6

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Answer 7

It is an unregulated, agressive, high risk (potentially high return) pool of money (similar to mutual fund)