Question

Discuss the article Do Hedge Funds Hedge in total. Use between 6 and 10 sentences. Penmanship will have a significant effect on the grade. Organization and grammar will also count. Bullet points are not acceptable.

Article: Clifford Asness; Robert Krail; John Liew Journal

Answer 1

A Hedge fund is basically an investment partnership wherein the money pooled up into a fund by the investors will be managed by a fund manager according to the fund's strategy. A hedge fund's purpose is to maximize investor returns and eliminate risk i.e, the managers can "hedge" themselves by going long (if they foresee a market rise) or shorting stocks (if they anticipate a drop). If this structure and objectives sound a lot like those of mutual funds, they are, but that is basically where the similarities end. Hedge funds they are generally considered to be more aggressive, risky and exclusive than mutual funds.Even though hedging strategies are employed to reduce risk, most consider their practices to carry increased risks and investors in hedge funds have to meet certain net worth requirements.A hedge fund can basically invest in anything – land, realestate, derivatives, currencies and other alternative assets.Hedge funds will often use leverage or borrowed money to amplify their returns, which potentially exposes them to a much wider range of investment risks. Returns, risk, and volatility can be controlled by the mix of underlying strategies and funds.