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Hedge funds are forms of alternative investment that pool capital invested in various assets. This type of aggressive and risky investment is often criticized, but it can be very profitable. Hedge n finance, and they afghanistan phone data have never been so healthy with more than 4 trillion dollars of assets under management. However, there is no exact and legal definition of hedge funds: all the more reason to study these financial products a little more closely.



What is a hedge fund?
Contrary to what its name suggests ("hedge fund" means "hedge fund"), a hedge fund is anything but a risk-free product. Hedge funds are speculative funds belonging to the family of alternative financing, such as crowdfunding or inter-company lending.

Hedge funds take the form of a mutual fund reserved for accredited investors (private institutions or individuals wishing to invest in wealth management ) because the entry ticket is generally high (several hundred thousand dollars minimum).

The specificity of hedge funds is that these investment products are much less regulated than traditional funds offered by financing organizations or banking establishments, in the form of SICAVs or mutual funds (FCP), for example. They are essentially designed to generate significant returns, whether the market is bullish or bearish. Hedge funds are therefore often presented as totally independent of market developments, even if this is not always the case.

The goal of a hedge fund is to maximize its return and minimize risk by multiplying the forms of investment: taking short and long positions, buying and selling stocks, trading bonds, currencies, convertible securities, raw and agricultural commodities, derivative products, etc. As its name suggests, the fund attempts to "hedge" the risks to the investor's capital against market volatility by using alternative investment approaches.

How do hedge funds work?
Hedge funds use complex financing techniques that make them relatively unaffected by market conditions. Their performance depends instead on the skill of their managers, who mainly use 3 methods:

Leverage is borrowing funds to invest without capital, betting on the future performance of your portfolio. Managers often use leverage of 10, which means that they invest 10 times more money than they actually own!
Short selling involves betting on the decline of securities that the investor does not own, but borrows in the hope of buying them back cheaper later. This strategy is very risky in the event of a rapid upward trend in the market.
Active trading involves making a very large number of transactions by multiplying purchases and sales in order to make a gigantic amount of micro-gains.