Hedge Funds

Hedge funds are a pool of funds, whose main aim is to generate returns that outperform the market returns. Hedge Funds take both long and short positions, buy and sell equities, initiate arbitrage, trade bonds, currencies, commodities and derivative products to generate high returns at reduced risk. Hedge funds require large initial investment, so their investors include high net worth individuals and families, and institutional investors. They are under less scrutiny from regulators and hence are accessible to accredited investors only. The fund managers have a sound financial acumen and generally deal in derivatives and take on huge leverages. Hedge funds charge both an expense ratio and a performance fee. This general fee structure is known as “Two and Twenty - a 2% asset management fee and 20% cut of any gains generated. Some of the largest hedge funds include Bridgewater Associates, Man Group and Two Sigma Investments.