Definition of a Hedge Fund:
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.
The basics
Each fund has its own strategy which determines the type of investments and the methods of investment. Hedge funds invest in a broad range of investments extending over shares, debt, commodities and beyond.
Hedge Funds try to offset losses by hedging their investments using a variety of methods. For example short selling.
Hedge Funds are open to only a limited amount of wealthy investors. Belowe is a list of typical investors:
Hedge fund managers are paid in proportion to the profitability of the fund’s investments (typically 20% of profits).
The net asset value of a hedge fund can run into many billions of dollars, and this will usually be multiplied by leverage. Hedge funds dominate certain specialty markets such as trading within derivatives with high-yield ratings and distressed debt.
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