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26/04/2018 16:05

What is Hedge Fund?

Hedge funds are alternative investments using pooled funds that may use a number of different strategies in order to earn active return for their investors. Hedge funds may be aggressively managed or make use of derivatives and leverage in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark). Because hedge funds may have low correlations with a traditional portfolio of stocks and bonds, allocating an exposure to hedge funds can be a good diversifier.

Hedge funds are made available only to certain sophisticated or accredited investors and cannot be offered or sold to the general public. As such, they generally avoid direct regulatory oversight, bypass licensing requirements applicable to investment companies, and operate with greater flexibility than mutual funds and other investment funds. Even big financial institutions such as banks and insurance companies invest a small percentage of their capital in hedge funds for diversification, returns and risk-aversion.

As a hedging tool for market turbulence.

While hedge funds have existed for many decades, they have become increasingly popular in recent years, growing to be one of the world's major investment vehicles and sources of capital appreciation, especially as a hedging tool in a volatile and turbulent market.

As of end of 2015, there are about 10,000 Hedge Funds in the world with a total asset value of at least $3 Trillion Dollars.

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