The idea is that by diversifying the investments which make up their investment portfolio, they are at less risk because they’re not completely dependent upon one asset class.
To offset risk, hedge funds will deploy various financial instruments or market strategies. Hedging in finance means to limit or reduce exposure to risk, in the hope to make an investment more secure and successful despite market instability. Why are they called hedge funds? Hedging in finance can be similar to actual garden hedges-growing them to outline a yard is an alternative to traditional fencing but still creates a barrier, often for security and privacy. As such, hedge funds are touted by some as immune to market forces, though analysis of performance shows that this may not be the case. This type of investment is designed to generate returns, regardless of whether the market is up or down. Hedge funds are typically managed by institutional investors who utilize a wide array of nontraditional investment strategies with the primary goal of mitigating risk.
#Hedge fund meaning professional
They pool money from professional investors and invest it with the intent of making a profit, also known as realizing a return on their investment. What is a hedge fund? Hedge funds are alternative investment funds.
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