What is a Hedge Fund?

Discussion in 'Finance, Property, Law' started by thenutstrangler, Feb 8, 2008.

Welcome to the Army Rumour Service, ARRSE

The UK's largest and busiest UNofficial military website.

The heart of the site is the forum area, including:

  1. I'm sure they were in the news recently for some sort of illegality/insider trading scam.

    But what the feck are they? How do they work? :?

    I've just found out a mate is working for a "financial institution" that deals with them and wondered what they're all about.
     
  2. blue-sophist

    blue-sophist LE Good Egg (charities)

    A hedge fund is a private investment fund that charges a performance fee and is typically open to only a limited range of qualified investors. Hedge fund activity in the public securities markets has grown substantially as it constitutes approximately 30% of all U.S. fixed-income security transactions, 55% of U.S. activity in derivatives with investment-grade ratings, 55% of the trading volume for emerging-market bonds, as well as 30% of equity trades. Hedge Funds dominate certain specialty markets such as trading in derivatives with high-yield ratings, and distressed debt.

    As their name implies, hedge funds often seek to offset potential losses in the principal markets they invest in by hedging their investments using a variety of methods, most notably short selling. However, the term "hedge fund" has come in modern parlance to be applied to many funds that do not actually hedge their investments, and in particular to funds using short selling and other "hedging" methods to increase risk, and therefore return, rather than reduce it.

    Hedge funds have acquired a reputation for secrecy. Being outside the regulatory regime that applies to retail funds greatly reduces the information a hedge fund is legally required to make public. Additionally, divulging trading methods and positions would compromise the business interests of many types of hedge fund, tending to limit the information they want to release.

    The assets under management of a hedge fund can run into many billions of dollars, and this will usually be multiplied by leverage. Their sway over markets, whether they succeed or fail, is therefore potentially substantial and there is a continuing debate over whether they should be more thoroughly regulated.

    Hope that helps.

    Thank you Google
     
  3. Cheers B S, I obviously didn't use the correct terms when I googled it because all I got was adverts for hadge funds or firms that wanted my "Investment"!

    Mods, feel free to ditch this shyte in the "hole", I'm off back to the NAAFI!
     
  4. Bushed if I know! I'd leaf them alone mate. [/groan...]