What is a hedge fund? how can Citibank jack up the value of it&sell it in Norway&3counties have lost150mill kr

Answer 1

Ironically the first Hedge Funds were pool funds for rich individuals or organisations that used unusual investments to try to limit risk and volatility.

These days the term 'hedge funds' is used as a generic one to cover everything the press doesn't recognise as a mutual fund. That means anything from oil money investments by Middle East governments to property get rich quick schemes gets called a Hedge Fund.

In reality most 'real' Hedge Funds are independent partnerships or owned by Banks. They are still pool funds for rich individuals or organisations that use unusual investments (like derivatives) that are not available to the man on the street.

The difference is that these days the risk management concept has disappeared. Most Hedge Funds just try to make higher returns by being more agressive than the traditional investor. That might mean taking a stake in the company and then campaigning for a policy change. Or it might mean buying up assets with borrowed money in the hope that you earn more than you pay in interest.

The position those Norwegian cities are now in (having bought into hedge funds over the last few years) is unfortuate but not really about hedge funds. It is a simple case of selling inappropriate products. Citi saw a target with lots of oil money and made sales they shouldn't have. It's that simple. They could have been selling Forests. Or Mines. The product was rubbish and that's why those Norwegian cities lost money.

Answer 2

A hedge fund is a financial investment instrument.
Investing in such things involves risk. If Norway lost money, they should be more careful about where they invest in the future.

Answer 3

Hedge funds are inhertly risky. That is why they are generally sold only to rich investors (or countries). You can make big gains, but you can also make big losses. Caveat emptor - buyer beware.