This page was last edited on 27 April 2017, at 20:13. Over time, the types and nature of the hedging concepts expanded, as did the different types the hedge fund edge pdf investment vehicles.
Hedge funds are made available only to certain sophisticated or accredited investors and cannot be offered or sold to the general public. As such, they generally avoid direct regulatory oversight, bypass licensing requirements applicable to investment companies, and operate with greater flexibility than mutual funds and other investment funds. United States and Europe with intentions to increase government oversight of hedge funds and eliminate certain regulatory gaps. Hedge funds have existed for many decades and have become increasingly popular.
Hedge fund managers often invest money of their own in the fund they manage. Both co-investment and performance fees serve to align the interests of managers with those of the investors in the fund. The word “hedge”, meaning a line of bushes around a field, has long been used as a metaphor for the placing of limits on risk. Nowadays, however, many different investment strategies are used, many of which do not “hedge risk”. 1920s, there were numerous private investment vehicles available to wealthy investors. Janet Tavakoli calls Graham’s investment firm the first hedge fund, based on what she was told by Warren Buffett during a lunch in 2006.
Jones referred to his fund as being “hedged”, a term then commonly used on Wall Street to describe the management of investment risk due to changes in the financial markets. They received renewed attention in the late 1980s. Over the next decade, hedge fund strategies expanded to include: credit arbitrage, distressed debt, fixed income, quantitative, and multi-strategy. 13 trillion total assets under management. Strategies within these categories each entail characteristic risk and return profiles. A fund may employ a single strategy or multiple strategies for flexibility, risk management or diversification.
Market neutral funds have less correlation to overall market performance by “neutralizing” the effect of market swings, whereas directional funds utilize trends and inconsistencies in the market and have greater exposure to the market’s fluctuations. Global macro is often categorized as a directional investment strategy. Global macro strategies can be divided into discretionary and systematic approaches. This is also known as a “managed future fund”. They also take both long and short positions, allowing them to make profit in both market upswings and downswings.