A hedge fund is actually a type of investment which takes part in a wide range of investments and trading activities compared to other funds. Even so, hedge funds are generally open only to a particular class of investors as specified by regulatory agencies. Every individual can?t invest in these types of funds. Only specific investors can place their funds in them. Institutions like university foundations and endowments, pension funds, or individuals with high net worth are permitted to make an investment. The money invested in a hedge fund is used in a varied range of investments. However, liquid securities are the most typical investment that?s generally traded. These funds follow various investing approaches like leverage and short selling as a way to increase the return on investment.
The investment worth of the investor in a particular fund is established by his actual share of the net asset value of that fund. Thus, the increase and decrease in the total value of the fund?s assets plus the fund expenses are reflected in the amount that the investor can withdraw later.
The strategies of hedge funds are intended for attaining positive return on investment, despite whether the financial markets are falling or rising. The fund managers are professional and well qualified in managing finances and investments. They?re paid a management fee to compensate them for their expertise in addition to a performance fee if the overall value of the fund grows during the year. Investments worth billions of dollars are committed to these funds. According to an estimate, the size of the global hedge fund sector is around 2 trillion US dollars and is predicted to grow rapidly during the coming years.
Because these funds are not open to the general public, there are actually minimal constraints regarding investment and the methods associated with management of these funds compared to funds that are available to the general public. That is the main reason why these types of funds enjoy a lot of flexibility to participate in a diverse variety of investment opportunities and trading activities.
Men and women with enormous amounts of cash to invest and are ready to take serious risks like to invest in these types of funds. Given that the risks concerned are much higher, investors can lose their whole investment quite easily. Also, these funds promise massive return on investment and people might double their money rather quickly. Thus, individuals who love to take risks to earn greater returns prefer to invest in these types of funds.
Investing in hedge funds provides an excellent opportunity to earn big gains in a short time period. However, the risks are equally high. Since the funds are professionally managed, these funds promise higher return on investment even with the risks linked to investments and trading activities.
Are you looking for information on the best hedge fund managers? Be sure to visit Insider Monkey for information on Warren Buffett and John Paulson.
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