Hedge Fund is one type of investment fund that trades in liquid assets pooling investments from wealthy investors (individual or business) that meet certain criteria set by the fund managers.
These funds usually come with high leverage and no particular regulations. They can make investments in just about anything starting from land, real estate to stocks, derivatives and currencies.
Hedge Fund is a pooled investment fund from qualified wealthy investors with an annual income of more than USD $200,000 for two previous years or having a net worth of USD $1 million. Some may set the minimum requirements even higher.
Types of Hedge Funds
There are a number of different types of hedge funds to choose from that are available to the high net worth investors and knowing their existence would lead to finding the right one for the investor. The major types are listed below -
- Global macro funds
- Directional funds
- Event-driven funds
- Relative value funds
- Equity arbitrage
- Mortgage arbitrage
- Funds of funds
- Emerging markets
Use of the Term in Sentences
- Hedge funds are private investments open for wealthy investors where mutual funds are open to the public for daily trading.
- An investor should focus on the metrics that are required to them and the scale return they are seeking on their investment before they can commit to investing in a certain type of hedge fund.