Hedge Funds - Concept

Over the last 15 years, hedge funds have become increasingly popular with high net worth individuals, as well as institutional investors. The number of hedge funds has risen by about 20% per year and the rate of growth in hedge fund assets has been even more rapid.

A hedge fund is a private investment fund, charging a performance fee and is open to only a limited number of investors. These funds are like mutual funds, which collect money from investors and use the proceeds to buy stocks and bonds. They can invest on almost any type of opportunity; in any market where in good returns are expected with low risk levels.

Protecting capital and producing good return in all kinds of market conditions, while attempting to minimize the risk, is the main objective of most of the hedge funds.

Hedge funds have grown in size and have a great influence on public securities and private investment markets. Hedge funds are not currently subject to any direct regulation, unlike mutual funds, pension funds and insurance companies. They are limited only by the terms of contacts governing the particular fund.

Hedge funds may be either long or short assets and may enter into futures, swaps, and other derivative contracts. In this way, hedge funds are able to follow complex strategies, intending to profit from market volatility or from falling market.