clipped from: www.businesshackers.com You’ll often see the title ‘hedge fund manager’ in the bios of some of Wall Street’s famous investment gurus. But what exactly is a hedge fund? How is different than any other fund? And how do you get in on the action?
by: Jay Northco
Hedge funds are private investment partnerships that are usually offered to limited number of investors and require a significant initial minimum investment. Hedge funds are normally open to institutional or otherwise accredited investors. Those investors are also required to keep their money in the fund for a minimum period, usually one year.
Basically, hedge funds are mutual funds for the super-rich. They resemble mutual funds in the way investments are pooled and professionally managed, but they are significantly different in the way fund can cooperate.
Hedge funds are lightly regulated private funds that are usually characterized by unconventional investment strategies. These funds are generally more aggressively managed and use advanced investment strategies such as leverage, long, short and derivative positions in both domestic and international markets with the goal of generating high returns. Regular investment funds are usually limited to ‘going long” and buying bonds, equities or money market instruments. Hedge funds also have the ability to “short” those instruments they believe will fall in price. Hedge funds are thus able to create more complex investment structures which can profit in times of market volatility, or even in a falling market.