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game16
08-18-07, 09:24 PM
what are hedge funds? i've been looking for an explanation ( read the one on wikipedia, still don't get it) and racking my brain ( i read somewhere that as a hedge fund grows it disperses risks, unlike credit) so can anyone explain it to me?

c1ue
08-19-07, 10:54 AM
My short definition:

A hedge fund is a pool of capital gathered from accredited investors (each w/ net worth over $2.5M liquid).

Longer explanation:

This allows the hedge fund to operate without many of the regulations, reporting, and required transparency of normal mutual funds, etc.

This also allows them a much wider range of strategies than normally employed by more public institutions - including larger ranges of leverage, riskier strategies, narrower specialities, etc.

Lastly the unusual status of hedge funds also allows them to charge much higher fees - a typical structure that evolved is the 2 and 20: 2% of assets owned plus 20% of profits. There are also tax benefits to the hedge fund structure for the fund operators.

jk
08-19-07, 11:10 AM
http://en.wikipedia.org/wiki/Hedge_fund

FRED
08-19-07, 11:36 AM
See also: Hedge Fund (http://www.itulip.com/glossary.htm#Hedge_Fund), USIP (http://www.itulip.com/glossary.htm#USIP), and Most Hedge Funds Suck (http://www.itulip.com/forums/showthread.php?t=733).

grapejelly
08-19-07, 11:43 AM
think partnerships. Limited partners contribute money. Somebody manages the thing. Since the partners are high net worth types, they are supposed to be big boys and girls and can do what they want.

game16
08-19-07, 12:58 PM
thanks, that really explained some things for me

wow that hedge funds suck article is really scary <_<