How To Guide For: A Look At Hedge Funds -- Understanding The Basics

A hedge fund is an investment fund which is allowed to use aggressive strategies that are unavailable to mutual funds, including selling short, leverage, program trading, swaps, arbitrage, and derivatives. Hedge funds are exempt from many of the rules and regulations governing other mutual funds, which allows them to accomplish aggressive investing goals. They are restricted by law to no more than 100 investors per fund. Investors in hedge funds pay a management fee and hedge funds also collect a percentage of the profits (usually 20%). Hedge funds aim to deliver positive returns under all market conditions while reducing risk and preserving capital. Hedge funds are as diverse as the managers who run them. The SEC allows only “accredited investors” to invest in hedge funds. Most hedge funds do not allow an investment of < $250,000; the funds also limit how much can be withdrawn and when. Relative value hedge funds represent ~ 27% of hedge fund assets. These funds go long and short at the same time. Event-driven index funds, which represent ~ 26% of all hedge fund assets, invest in securities expected to be influenced by corporate activity like -- mergers, bankruptcies and hostile takeovers. Macro strategy funds anticipate changes in economic trends and policy decisions. To get more in depth information on hedge funds click on the pictures below to read the articles.

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