A hedge fund is a form of investment that takes part in a wide range of opportunities and trading activities in comparison to other types of funds. Nonetheless, hedge funds are generally open to a particular class of investors as specified by regulatory agencies. Everyone cannot invest in these funds. Only particular investors can place their funds in them. Institutions like university foundations and endowments, pension funds, or individuals with high net worth are allowed to invest. The money invested with a hedge fund is utilized in a wide variety of investments. However, liquid securities are the most common investment that is generally traded. These funds adopt different investing strategies such as leverage and short selling as a way to increase the return on investment.
The investment value of the investor within a particular fund is established by his share of the net asset value of that fund. Thus, the increase and decrease in the total value of the fund?s assets along with the fund expenses are reflected in the sum that an investor can take out later.
The strategies of hedge funds are intended for attaining positive return on investment, regardless of whether the markets are rising or falling. The fund managers are generally professional and properly qualified in handling finances and investments. They?re paid a management fee to compensate them for their expertise in addition to a performance fee when the overall value of the fund increases during the year. Investments valued at billions of dollars are invested in these funds. Based on one estimate, the size of the global hedge fund market is approximately 2 trillion US dollars and it is predicted to grow quickly during the coming years.
Because these types of funds are not available to the general public, there are minimal constraints regarding investment and the methods involved with management of these funds when compared to funds that are available to the general public. That is the primary reason why these types of funds enjoy a great deal of freedom to participate in a diverse range of investment opportunities and trading activities.
Individuals with large amounts of money to invest and are willing to take serious risks prefer to invest in these funds. Since the risks concerned are much higher, investors can lose their whole investment really quickly. Also, these funds promise large return on investment and people could even double their money rather quickly. Therefore, people who love to take risks to gain greater returns like to invest in these types of funds.
Investment in hedge funds offers an excellent opportunity to earn large gains in a very short period of time. However, the risks are just as high. Since the funds are professionally managed, these funds promise higher return on investment in spite of the risks associated with investments and trading activities.
Are you looking for information on the best hedge fund managers? Be sure to visit Insider Monkey for information on David Einhorn and George Soros.
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