What is a Hedge Fund

Question

What is a Hedge Fund

Answer 1

Hedge funds are private investment funds with a certain criteria to accept investors. They are unregulated and limited to their number of investors, unlike mutual funds that are regulated by the SEC and virtually unlimited in the number of investors they accept. Although mutual funds do close to new investors at times. Mutual funds invest in stocks and bonds. Hedge funds invest in every part of the financial markets. stocks, bonds, commodities, currencies, futures and other things. And they can take long and short positions in any investment. So they can create complex hedging strategies. But they also use large degrees of leverage, with borrowed money, which create a great deal of risk. Mutual funds seek relative returns. Returns relative to an index such as the S&P 500. They seek to do better than the index, but that doesnt mean a positive return. Hedge funds seek absolute returns, positive returns no matter what the market does. Hedge funds typically charge a 2 percent management fee, and take 20 percent of the profits.

Answer 2

An aggressively managed portfolio of investments that uses advanced investment strategies such as leverage, long, short and derivative positions in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark).