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Hedge Fund Definition . Hedge funds may be aggressively managed or make use of derivatives and leverage in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark). It is important to note that hedge funds are generally only accessible to accredited investors as they require less SEC regulations than other funds. Technocracy is an organizational structure or system of governance where decision-makers are selected on the basis of technological knowledge. Provides information about the state budget, demographics, monthly financial bulletins, and related links. We have issued more than 2 million property tax freeze, property tax relief, and STAR checks, and we continue to mail checks daily. Due to very high call volumes. One aspect that has set the hedge fund industry apart is the fact that hedge funds face less regulation than mutual funds and other investment vehicles. BREAKING DOWN \'Hedge Fund\'Each hedge fund is constructed to take advantage of certain identifiable market opportunities. Hedge funds use different investment strategies and thus are often classified according to investment style. There is substantial diversity in risk attributes and investments among styles. Legally, hedge funds are most often set up as private investment limited partnerships that are open to a limited number of accredited investors and require a large initial minimum investment. Investments in hedge funds are illiquid as they often require investors keep their money in the fund for at least one year, a time known as the lock- up period. Withdrawals may also only happen at certain intervals such as quarterly or bi- annually. The History of the Hedge Fund Former writer and sociologist Alfred Winslow Jones’s company, A. W. It was while writing an article about current investment trends for Fortune in 1. Jones was inspired to try his hand at managing money. To move on or ahead; proceed: The train passed through fields of wheat. To extend; run: The river passes. Each hedge fund is constructed to take advantage of certain identifiable market opportunities. Hedge funds use different investment strategies and thus are often. Get real-time stock quotes & charts, financial news, currency conversions, or track your portfolio with Google Finance. Bankrate.com is an independent, advertising-supported publisher and comparison service. Bankrate is compensated in exchange for featured placement. What is \'Liquidity\' Liquidity describes the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset\'s price. Get expert advice for all your financial questions, from spending, saving and investing smartly; to tackling taxes; to buying a home; to getting the right insurance. Search for ticker symbols for Stocks, Mutual Funds, ETFs, Indices and Futures on Yahoo! He raised $1. 00,0. This investing innovation is now referred to as the classic long/short equities model. Jones also employed leverage to enhance returns. In 1. 95. 2, Jones altered the structure of his investment vehicle, converting it from a general partnership to a limited partnership and adding a 2. As the first money manager to combine short selling, the use of leverage, shared risk through a partnership with other investors and a compensation system based on investment performance, Jones earned his place in investing history as the father of the hedge fund. Hedge funds went on to dramatically outperform most mutual funds in the 1. Fortune highlighted an obscure investment that outperformed every mutual fund on the market by double- digit figures over the past year and by high double- digits over the last five years. However, as hedge fund trends evolved, in an effort to maximize returns, many funds turned away from Jones\' strategy, which focused on stock picking coupled with hedging and chose instead to engage in riskier strategies based on long- term leverage. These tactics led to heavy losses in 1. The industry was relatively quiet for more than two decades until a 1. Institutional Investor touted the double- digit performance of Julian Robertson\'s Tiger Fund. With a high- flying hedge fund once again capturing the public\'s attention with its stellar performance, investors flocked to an industry that now offered thousands of funds and an ever- increasing array of exotic strategies, including currency trading and derivatives such as futures and options. High- profile money managers deserted the traditional mutual fund industry in droves in the early 1. Unfortunately, history repeated itself in the late 1. Robertson\'s, failed in spectacular fashion. Since that era, the hedge fund industry has grown substantially. Today the hedge fund industry is massive—total assets under management in the industry is valued at more than $3. Preqin Global Hedge Fund Report. The number of operating hedge funds has grown as well. There were around 2,0. That number increased to over 1. However, in 2. 01. Hedge Fund Research. Below is a description of the characteristics common to most contemporary hedge funds. Key Characteristics of Hedge Funds 1. They\'re only open to . As such, the Securities and Exchange Commission deems qualified investors suitable enough to handle the potential risks that come from a wider investment mandate. They offer wider investment latitude than other funds: A hedge fund\'s investment universe is only limited by its mandate. A hedge fund can basically invest in anything—land, real estate, stocks, derivatives, and currencies. Mutual funds, by contrast, have to basically stick to stocks or bonds, and are usually long- only. They often employ leverage: Hedge funds will often use borrowed money to amplify their returns. As we saw during the financial crisis of 2. Fee structure: Instead of charging an expense ratio only, hedge funds charge both an expense ratio and a performance fee. This fee structure is known as . This wide latitude may sound very risky, and at times it can be. Some of the most spectacular financial blow- ups have involved hedge funds. That said, this flexibility afforded to hedge funds has led to some of the most talented money managers producing some amazing long- term returns. The first hedge fund was established in the late 1. More recently, institutional investors – corporate and public pension funds, endowments and trusts, and bank trust departments—have included hedge funds as one segment of a well- diversified portfolio. It is important to note that . The name is mostly historical, as the first hedge funds tried to hedge against the downside risk of a bear market by shorting the market. Nowadays, hedge funds use dozens of different strategies, so it isn\'t accurate to say that hedge funds just . Concentrated investment strategy exposes hedge funds to potentially huge losses. Hedge funds typically require investors to lock up money for a period of years. Use of leverage, or borrowed money, can turn what would have been a minor loss into a significant loss. Hedge Fund Strategies. There are numerous strategies that managers employ but below is a general overview of common strategies. Equity market neutral: These funds attempt to identify overvalued and undervalued equity securities while neutralizing the portfolio’s exposure to market risk by combining long and short positions.
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