The term “hedge fund” can actually be somewhat misleading – not many hedge funds actually hedge their investments. Hedging is a strategy that reduces the risk of a business transaction. Hedge funds use many different investment strategies, but they often engage in high-risk trading because their goal is to make as much money as possible as quickly as possible, which is different from, say, an index mutual fund that just tries to outperform an index (for example the S&P500). What really distinguishes hedge funds is how hedge fund managers get paid: management fee plus a performance fee.
Posts Tagged ‘hedge fund’
How does a hedge fund manager actually make money?
Friday, October 23rd, 2009A Hedge Fund is…
Thursday, August 20th, 2009A hedge fund is a limited partnership of investors that uses high-risk methods, such as investing with borrowed money, in the hope of realizing large gains. Similar to a mutual fund, a hedge fund pools investors’ money together in order to increase the possibility of realizing serious earnings on their investments.