Find solution
What are hedge funds?

What are hedge funds?

  • I was looking at the Forbes list of richest people. It classified some of them as rich from hedge funds. What are hedge funds? Does that have something to do with the stock market? Thanks so much!

  • Answer:

    So Tech T has absolutely no clue what a hedge fund is, but he answers the question anyway. Why do people do that? Of the billions of questions on YA, he can't find the one he knows the answer to? Anyway, hedge funds are largely unregulated investment pools reserved for qualified investors which as a practical matter mostly means institutions like insurance companies and banks. Hedge funds get around lots of regulation (like the Investment Advisors Act of 1940) by restricting the number of investors per fund to 100 or less and requiring that investors have high net worth. They can't advertise and tend to be somewhat secretive. Hedge funds invest in whatever their offering memorandum says they will invest in. At hedge funds I have worked at we have done conventional things like trade FX and listed stocks to really esoteric stuff like buy claims in bankruptcy court, a satellite, bonding facilities of bankrupt companies, run a huge interest rate derivatives portfolio, etc.. Hedge funds almost alwasy get their big money by charging incentive fees for gains. A typical incentive fee is 20% of teh money made. So John Paulson has about $40B under management. If he has a 25% year, then he keeps 20% of 25% of $40B which is $2B which is not a bad paycheck (leBron won't make close to that in his entire career).

justthew... at Yahoo! Answers Visit the source

Was this solution helpful to you?

Other answers

Sort of, hedge funding is very difficult to describe. It follows more of how insurance works, companies pay in for a set year, if nothing happens, the funder will pay the company 10% and keep the rest. If the company defaults, they claim 100% but don't lose their title or assets. Many mangers make money, by betting which companies will fail. It's all based on speculation, and for that reason, very risky.

Related Q & A:

Just Added Q & A:

Find solution

For every problem there is a solution! Proved by Solucija.

  • Got an issue and looking for advice?

  • Ask Solucija to search every corner of the Web for help.

  • Get workable solutions and helpful tips in a moment.

Just ask Solucija about an issue you face and immediately get a list of ready solutions, answers and tips from other Internet users. We always provide the most suitable and complete answer to your question at the top, along with a few good alternatives below.