Economics: could someone explain to me in simple terms, what a hedge fund is?
- Anonymous1 decade agoFavorite Answer
A hedge fund is basically a pool of capital collected together by a limited number of investors for the purposes of investing most likely in numerous different areas like shares, debts, acquisitions and so forth.
Usually hedge funds will also try to hedge their bets (hence the name) by short selling shares and other strategies, although I not think this is always the case.
I think also there is some legal difference between a hedge fund and other investment funds. They are have greater leeway with regulations and I think they pay a premium for that. I am not certain however.
- 4 years ago
You give your money to a "manager" who invests it for you. He will invest in certain things but he will always "hedge" his bet so he can never lose more than 5% of the investment. If it goes up in value, he wasted his money by "hedging". Most hedge fund managers invest in things that pay a very small profit. It is small in percentages. But if you put $Billions of dollars into a small percentage, you can make a lot of money.
- 1 decade ago
yes we can