hedge fund investments
Hedge fund investments refer to investing in funds that can use one or more alternative investment strategies, including investing in asset classes such as currencies or distressed securities, and utilizing tools such as leverage, derivatives, and arbitrage.
Hedge funds have gained reputation for being extremely risky and volatile investments, after such high-profile hedge fund disasters as Long Term Capital Management (LTCM).
However, hedge funds have existed for over fifty years, and have risen in popularity especially in recent years.
According to the Hedge Fund Association, the hedge fund industry is estimated to be about $400-$500 billion industry and to grow at about 20% per year, with approximately 7000 active hedge funds in the market.
Not all hedge funds are the same, and investment returns, volatility, and risk varying enormously among the different hedge fund strategies.
The Hedge Fund Association lists the following major hedge fund strategies:
- aggressive growth
- distressed securities
- emerging markets
- funds of funds
- market neutral - arbitrage
- market neutral - securities hedging
- market timing
- short selling
- special situations
Hedge Fund Investments and the SEC
One of the most important things to know about hedge funds, according to the SEC (Securities and Exchange Commission), is that unlike mutual funds, hedge funds are not registered with the SEC.
This means that hedge funds are subject to very few regulatory controls.
In addition, many hedge fund managers are not required to register with the SEC and therefore are not subject to regular SEC oversight.
Because of this lack of regulatory oversight, hedge funds historically have been available to accredited investors and large institutions, and have limited their investors through high investment minimums.
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