What is Hedge Fund

Do you know about hedge fund? In this article I’ll share about ‘hedge fund’. Honestly, I’m not really understand about this term so I’ll search it via net and it is the findings:-

Hedge fund manager

WHAT IS HEDGE FUND

 

It is a term used to describe an investment partnership setup by a money manager. It can take the legal form of a limited liability company or a limited partnership so that if the company goes bankrupt, the creditors can’t go after the investors for money than they’ve put into the fund.
The manager of the hedge fund is paid a percentage of the profits he or she earns on the money investors have deposited with his company. ( About.com)

A hedge fund uses a range of investment techniques and invests in a wide array of assets to generate a higher return for a given level of risk than what’s expected of normal investments. In many cases, the funds are managed to generate a consistent level of return, regardless of what the market does.

To understand what a hedge fund is,you must  know what hedging is. Hedging means reducing risk, which is what many hedge funds are designed to do. Although risk is usually a function of return (the higher the risk, the higher the return), a hedge fund manager has ways to reduce risk without cutting into investment income.

A hedge fund manager can look for ways to get rid of some risks while taking on others with an expected good return. For example, a fund manager can take stock market risk out of the fund’s portfolio by selling stock index futures. Or (s)he can increase her return from a relatively low-risk investment by borrowing money, known as leveraging. Keep in mind, however, that risk remains, no matter the hedge fund strategy.

The challenge for the hedge fund manager is to eliminate some risk while gaining return on investments — not a simple task, which is why hedge fund managers get paid handsomely if they succeed. ( Dummies.com)

 

How about that? Do you understand about hedge fund now? If you have any idea or definition about hedge fund let’s share it. Maybe you have different opinion about hedge fund.. Do you think it is good to invest in this type of investment? I don’t think so..

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