December 17, 2006
Understanding Hedge Fund
Hedge fund provides investment advice through pooled investment. Hedge funds were initially designed keeping in mind the investment of equity securities, leverage and short selling in equity markets and also portfolio’s exposure to them, that is the equity market movement.
There is no legal or constitutional definition of hedge fund. Professional investment managers organize hedge fund, who on the other hand have stake in the funds they manage. They also receive a management fee that comprises a considerable share of fund performance.
The advisers are proactive in operating. They organize the hedge fund in such a way that avoids regulations as mutual funds under the Investment Company Act of 1940. And yes, one more point to note here is that they do not make any public offerings of their securities.
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