© Copyright Acquisition International 2024 - All Rights Reserved.

Article Image - What Is A Hedge Fund?
Posted 20th December 2018

What Is A Hedge Fund?

An alternative investment, Hedge Funds are a form of fund that everyone has heard of but not everyone fully understands. In this article, Staff Writer Hannah Stevenson offers a brief overview of Hedge Funds and the benefits they provide for a seasoned investor.  Hedge Funds are a form of investment fund that pools its funds […]

Mouse Scroll AnimationScroll to keep reading

Let us help promote your business to a wider following.

What Is A Hedge Fund?
Hedge Fund

An alternative investment, Hedge Funds are a form of fund that everyone has heard of but not everyone fully understands. In this article, Staff Writer Hannah Stevenson offers a brief overview of Hedge Funds and the benefits they provide for a seasoned investor. 

Hedge Funds are a form of investment fund that pools its funds from multiple accredited investors and institutions, then uses this money to actively generate return, known as alpha, for investors. This is measured historically, and as such the fund aims to generate greater returns than previously through a series of investments.

Often, Hedge Funds are a short term investor but a long term investment, with investors usually putting large amounts of money into the fund and seeking to generate high alpha in return. When investing its pooled funds, Hedge Funds often take long term investment options and aim to make the maximum return on them before selling them short, which is what the first Hedge Fund was initially used for. After all, the fund is named after the strategy of attempting to reduce an investment’s risk whilst maximising its return- known as hedging.

Today, there are many types of Hedge Funds, and some also use longer term investing to generate alpha. There are also types of Hedge Fund that use leverage in both domestic and international markets with the goal of generating high returns, which is a riskier strategy than traditional hedging techniques. Thanks to such risker investment practices and their complex structures, Hedge Funds are considered an alternative investment. One factor that links all Hedge Funds is their focus on Market Neutrality: their aim to generate alpha regardless of the market direction at the time.

As such, Hedge Fund Managers are often more like traders than traditional Fund Managers. They usually receive 2% of the fund’s assets and 20% of its profits every year; the 2% of assets is a controversial figure, as it means that even if the fund loses money, the manager will still receive a significant portion of its worth. However, many Hedge Fund Managers manage their own money alongside that of their clients, and as such there is often an element of personal risk involved in managing a Hedge Fund, and the skill needed to successful generate alpha in this space is immense, so many would say that such a payment structure is a small price to pay.

Ultimately, due to their unique position in the investment market, and the fact that they operate under less regulation than other funds, Hedge Funds are only accessible to certain experienced and accredited investors. Hedge Funds also typically use riskier investment tactics, more volatile assets and a more complicated portfolio construction, and as such it is important that investors understand the risks involved in managing such a fund. However, for those with the knowledge, experience and capital, Hedge Funds can bring strong returns and act as a useful vehicle for managing a diverse range of assets.

For those interested in finding out more about Hedge Funds, AI offers a range of articles, interviews and insight, including our yearly Hedge Fund Awards.

Categories: Finance, Strategy


You Might Also Like
Read Full PostRead - Eye Icon
How to Protect Your Employees from Accidents at Work
Legal
18/04/2023How to Protect Your Employees from Accidents at Work

Preventing accidents in the workplace should be a priority for all businesses. Not only can they cause serious injuries but they can reduce productivity, leading to negative consequences, both financially and legally.

Read Full PostRead - Eye Icon
MXC Capital Limited Acquire Calyx Managed Services Ltd
Finance
Read Full PostRead - Eye Icon
Scams to be aware of as a professional
Strategy
06/05/2021Scams to be aware of as a professional

There are numerous opportunities to grow in the business world. You might start a company or look for the best places to invest money, but opportunities aren’t always what they seem to be. These are the most common scams to be aware of as a professional, so

Read Full PostRead - Eye Icon
Leading IP Adviser
Innovation
04/08/2015Leading IP Adviser

Leading IP Provider

Read Full PostRead - Eye Icon
Best SaaS Softwares to Help Improve Your Services
Innovation
28/09/2021Best SaaS Softwares to Help Improve Your Services

The business landscape has changed dramatically in recent times, as technology is booming and has become central to businesses across all industries.

Read Full PostRead - Eye Icon
Stephen Lee – A Barrister -At-Law on the Case
Legal
31/08/2016Stephen Lee – A Barrister -At-Law on the Case

Based in Brisbane, I am a barrister, mediator and arbitrator. As a Barrister, I appear in courts and tribunals in both Australia and beyond, and I am qualified to appear in Australia, England and Wales and New York.

Read Full PostRead - Eye Icon
Looking to the Future: The Forecasted Trends of Business Analytics
News
29/01/2024Looking to the Future: The Forecasted Trends of Business Analytics

It can sometimes be difficult to predict what might come next. For example, consider the weather model a local meteorological service may provide to communities – while it may be possible to determine a forecast for seven days to a high degree of accurac

Read Full PostRead - Eye Icon
Your Business Guide to Using Shopify Effectively and Making More Sales
News
15/08/2022Your Business Guide to Using Shopify Effectively and Making More Sales

Shopify can be a boon for small businesses, but only if you use it optimally. Improving sales figures and boosting customer loyalty is possible with the right tools and tactics on your side. This brief guide will get you started on your journey to leveraging S

Read Full PostRead - Eye Icon
A True Insight Into Fashion Consumer Trends
Innovation
02/09/2022A True Insight Into Fashion Consumer Trends

As the Most Innovative Consumer Behaviour & Shopping Intelligence Platform – 2022, FashWire has an exceptional reputation to maintain.



Our Trusted Brands

Acquisition International is a flagship brand of AI Global Media. AI Global Media is a B2B enterprise and are committed to creating engaging content allowing businesses to market their services to a larger global audience. We have 14 unique brands, each of which serves a specific industry or region. Each brand covers the latest news in its sector and publishes a digital magazine and newsletter which is read by a global audience.

Arrow