Hedge Funds
- Submitted by: cyc123
- Views: 511
- Category: Other
- Date Submitted: 04/23/2011 03:46 PM
- Pages: 5
- Report this Essay
Hedge Funds
Introduction
A commonly view of the public about the hedge funds is that it they are very risky, aggressive and highly leveraged financial tools. People may only focus on the ‘easy money’ made by some prime brokers such like George Soros’s Quantum Fund, and the mess they left behind in the Asian market during the 1990s’. However, those misconceptions may have provided people with a wrong image to understand the hedge funds. While some hedge (Matthew Ridley, 2004) funds are indeed aggressive, the vast majority of hedge funds are aiming to lower the risk profile than the one would associate with traditional long-only equity investments. Basically, a hedge fund (Alexander Ineihen, 2002) constitutes an investment program whereby the managers or partners seek absolute returns by exploiting investment opportunities while protecting principal from potential financial loss.
Main characteristics of the Hedge Fund industry
The hedge funds used to be very secretive, since it is far from our life. The hedge funds cannot be found in the high street, neither on the local yellow page book. That is because the hedge funds are not targeting the man or woman from the street. The clients of hedge funds are normally the very wealthy individuals and the professional investment companies which are controlling large amounts of funds such as pension funds and insurance firms. Therefore, the entry requirements of hedge funds are relatively high. To step into the hedge funds market, it normally requires a person with one million dollars or no less than two hundred thousand dollars net income from last fiscal year. For the clients, hedge funds are able to minimize the overall portfolio volatility and enhance returns. Hedge funds diversify the risk with a variety of instruments and minimize the correlation in different markets; they seldom take additional risk in their portfolios. The fund managers have many investment options such as short selling, leverage and derivatives....
Introduction
A commonly view of the public about the hedge funds is that it they are very risky, aggressive and highly leveraged financial tools. People may only focus on the ‘easy money’ made by some prime brokers such like George Soros’s Quantum Fund, and the mess they left behind in the Asian market during the 1990s’. However, those misconceptions may have provided people with a wrong image to understand the hedge funds. While some hedge (Matthew Ridley, 2004) funds are indeed aggressive, the vast majority of hedge funds are aiming to lower the risk profile than the one would associate with traditional long-only equity investments. Basically, a hedge fund (Alexander Ineihen, 2002) constitutes an investment program whereby the managers or partners seek absolute returns by exploiting investment opportunities while protecting principal from potential financial loss.
Main characteristics of the Hedge Fund industry
The hedge funds used to be very secretive, since it is far from our life. The hedge funds cannot be found in the high street, neither on the local yellow page book. That is because the hedge funds are not targeting the man or woman from the street. The clients of hedge funds are normally the very wealthy individuals and the professional investment companies which are controlling large amounts of funds such as pension funds and insurance firms. Therefore, the entry requirements of hedge funds are relatively high. To step into the hedge funds market, it normally requires a person with one million dollars or no less than two hundred thousand dollars net income from last fiscal year. For the clients, hedge funds are able to minimize the overall portfolio volatility and enhance returns. Hedge funds diversify the risk with a variety of instruments and minimize the correlation in different markets; they seldom take additional risk in their portfolios. The fund managers have many investment options such as short selling, leverage and derivatives....