what are hedge funds

''. hedge funds r most often set up as private investment partnerships that r open to a limited number of investors & require a very large initial minimum investment. Investments in hedge funds r illiquid as they often require investors keep their money in the fund for at least one year.

hedge funds (unlike mutual funds) r unregulated because they cater to sophisticated investors. In the U.S., laws require that the majority of investors in the fund be accredited. That is, they must earn a minimum amount of money annually & have a net worth of more than $1 million, along with a significant amount of investment knowledge. You can think of hedge funds as mutual funds for the super rich. They r similar to mutual funds in that investments r pooled & professionally managed, but differ in that the fund has far more flexibility in its investment strategies.

It is important to note that hedging is actually the practice of attempting to reduce risk, but the goal of most hedge funds is to maximize return on investment. The name is mostly historical, as the first hedge funds tried to hedge against the downside risk of a bear market by shorting the market (mutual funds generally can not enter into short positions as one of their primary goals).

.hedge funds use dozens of different strategies, so it is not accurate to say that hedge funds just ''hedge risk''. In fact, because hedge fund managers make speculative investments, these funds can carry more risk than the overall market.''

l hear this question almost every day - many people are confused because hedge funds can be so many things. Here is a video l posted to my site on the topic - http://richard-wilson.blogspot.com/2007/11/what-is-hedge-fund.html

- Richard
Richard Wilson
Hedge Fund Group (HFG)
http://hedgefundgroup.org