Hedge funds are investment funds that use financial leverage and derivatives to achieve better investment results. The name of hedge fund came from hedging, which originally is a defensive investment strategy, but in reality now most of the hedge funds are more offensive than defensive.
The variety of hedge funds is very wide and all of them may seek for different goals. Some of them will try to maximize return, some will seek for stable predetermined return rate, and others will go after some spread or other profitable niches that they can find. Most of the hedge funds may invest in any kind of assets because they are less regulated than mutual funds. They are less regulated in most countries because only professional investors are allowed to invest in these funds. There are strict regulations to avoid inclusion of investment beginners in to hedge funds.
The reality is that most of the hedge funds are speculating in one or other way, and time to time some big hedge funds are falling down with massive losses. If a very large fund goes much above a trend for some time, inevitably, one day comes an end to that. Others just fail because of high financial leverage.
However, hedge funds usually are big, and the biggest ones have great power and affect to media. Manipulating media gives the opportunity to make influence to the market. Such influence lets to profit just greatly sometimes. There have been many big cases that affected the entire world; however, nobody talks about it very loudly.
Every investment manager dreams about becoming manager of the hedge fund with freedom of actions, but not many really succeeds to create some value in investment results.
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