What Is A Hedge Fund? A Jargon-Free Guide

If you’re confused about the question “what is a hedge fund?” you are not alone. Part of their allure is their exclusivity and secrecy.

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While hedge funds are considered unique investments in the world of personal finance, in simple terms, they are nothing more than an investment vehicle similar to a mutual fund.

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The popularity of hedge funds has exploded over the last few decades, and there are now almost 4 trillion dollars invested in hedge funds worldwide.

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At its most basic, a hedge fund is a partnership between a professional fund manager and investors (often referred to as limited partners).

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Hedge funds implementing a global macro strategy look at the big picture economic and political trends worldwide and attempt to capitalize on these large-scale ideas.

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A directional strategy hedge fund uses market trends and directional market movements to identify equities or other securities.

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An event-driven hedge fund strategy seeks to identify risks and opportunities in specific events and make trades that pay off if those risks or opportunities are realized.

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A relative value strategy will attempt to take advantage of price discrepancies between securities, otherwise known as arbitrage.

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Due to government restrictions and minimum investment thresholds, the average person cannot invest directly in a hedge fund.

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What Is A Hedge Fund? A Jargon-Free Guide

If you’re confused about the question “what is a hedge fund?” you are not alone. Part of their allure is their exclusivity and secrecy.

While hedge funds are considered unique investments in the world of personal finance, in simple terms, they are nothing more than an investment vehicle similar to a mutual fund.

The popularity of hedge funds has exploded over the last few decades, and there are now almost 4 trillion dollars invested in hedge funds worldwide.

At its most basic, a hedge fund is a partnership between a professional fund manager and investors (often referred to as limited partners).

What Is A Hedge Fund?

Hedge funds implementing a global macro strategy look at the big picture economic and political trends worldwide and attempt to capitalize on these large-scale ideas.

Global Macro Strategy

A directional strategy hedge fund uses market trends and directional market movements to identify equities or other securities.

Directional Strategy

An event-driven hedge fund strategy seeks to identify risks and opportunities in specific events and make trades that pay off if those risks or opportunities are realized.

Event-Driven Strategy

A relative value strategy will attempt to take advantage of price discrepancies between securities, otherwise known as arbitrage.

Relative Value (Arbitrage) Strategy

Due to government restrictions and minimum investment thresholds, the average person cannot invest directly in a hedge fund.

How Can You Invest in Hedge Funds?

Swipe Up To Read More

Read More