The term ‘hedge’ is used to describe an investment made in order to reduce
risk in a security. Hedge Funds employ a manager who can use a range of investment strategies
and are not restricted to the same regulations as mutual funds. This enables them to set goals and target
a return. They are however legally restricted to a maximum of 100 investors in each fund which leads to
most having very high minimum investment levels, often $250,000. The Hedge Fund charges a management fee
and normally takes the first 20% of any profit.
Portfolio managers are allowed use a number of investment strategies as well as the option to invest
in futures and options in order to achieve targets. There are many types such as market neutral, interest
rates, mergers and acquisitions, so be sure to do your research before investing.
Hedge Funds pride themselves on being able to make money even in tough market conditions. For this
reason they are often seen as a safe investment for wealthy individuals. Having said that, some Hedge
Funds can be very risky so as always, be sure to research thoroughly and take advice if you have any uncertainties.
For detailed information on the evolution of Hedge Funds visit: http://en.wikipedia.org/wiki/Hedge_funds
Read an article on Hedge Funds from the BBC http://news.bbc.co.uk/1/hi/business/4499290.stm
To find a Hedge Fund visit www.moneyjungle.net/businessdirectory
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