Where does the name hedge fund come from?

The term “hedge fund” originates from the very fact that some fund managers simultaneously open long and short positions in equities. this is often a sort of hedging called hedging. The hedging may be a stock exchange term which is to limit the danger by opening two opposite positions which have roughly an equivalent size.

However, hedge funds use differing types of strategies and Day trading all kinds of monetary products, not just stocks. the primary hedge fund was established in 1949 by Alfred Winslow Jones, an Australian investor.

What is the aim of hedge funds?

The purpose of hedge funds is simple: to grow the capital of their clients. they struggle to get profit no matter the market conditions: bullish, bearish, volatile, etc. The hedge fund manager therefore acts sort of a trader. It adapts its strategy consistent with market fluctuations.

Investment structures

According to the SEC, the hedge fund is "a private, unregistered sort of open-end fund , which uses sophisticated online trading and arbitrage techniques to deal within the fund market." Unlike traditional funds, which derive their performance in correlation with the markets, hedge funds seek absolute performance that's not supported any benchmark .

Investors are therefore more exposed to the strategies employed by the hedge fund than to the markets. Investors who address hedge funds therefore seek outperformance of the market. Hedge funds therefore actively manage, using riskier financial products than traditional investments.

Instruments traded

Unlike mutual funds, which are often limited to stocks and bonds, hedge funds can trade a good range of monetary instruments.

Mutual funds,
Derivatives (futures, options, swaps, etc.).

This diversity has enabled hedge funds to draw in investors wishing to diversify their portfolios. There are nearly 15,000 hedge funds round the world that today manage quite $ 3 trillion .