Many people within the business industry would have thought about making better use of their money and have come up with ideas of the future of their money. A good businessman would spend much of their time researching and studying the financial market, as well as work on developing their business management skills. A relatively new businessman will come across terminology and phrases that are both unfamiliar and confusing, making it vital that they take some time out researching.
An important investment move that business people will hear of is hedge funds. This is an investment fund for a limited range of investors made eligible by a range of regulators who undertake a wider range of investment and trading ventures. A hedge fund has its own investment strategy which helps to identify the type of investments and methods used for the investment. This kind of investment uses shares, commodities and debt, and keeps some of the risks inherent in these kinds of investment at bay through short selling and derivatives.
The reason why hedge funds are only offered to a limited range of professionals and investors is because of their previous investing portfolio and income. The opportunity for hedge fund investment provides them with exemptions in regulations that govern short selling, leverage, derivatives, fee structures and liquidity of interests on the funds. Hedge funds can see many of these investors return a net asset value into billions of pounds. This investment is certainly the top most sought after investment opportunity, dominating most specialty market like trading within derivatives and debt.
The first recorded hedge fund investment was created in 1949 by Alfred W Jones, whose background lay in financial journalism. His belief lay in the theory that with individual assets where there is a price movement is similar component due to the market overall and due to the performance of that asset. He put his theory to the test and expanded on his portfolio buying assets that would accrue stronger prices and short selling assets that would have weaker prices. The end result was that the price movements would be cancelled out in that the loss on shares that have been short sold would be cancelled out by the extra gains made on the assets that had stronger prices.
Hedge funding was coined from the idea of hedging the risks involved in this kind of investment and allows for the investment manager the freedom to decide upon the investments on a purely commercial basis.
Gino Hitshopi is an expert on hedge funds having researched this kind of investment when studying financial journalism. For more information visit http://www.preqin.com/
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