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What is Hedge Fund and How They Work Explained
In the vast expanse of the financial universe, hedge funds represent an enigmatic yet enticing galaxy for investors seeking to venture beyond the conventional investment strategies. These sophisticated investment vehicles have captured the fascination of both seasoned and novice investors due to their potential for high returns, albeit paired with an equally high risk profile. Let’s delve into this intricate world to understand what hedge funds are, how they operate, and why they might be an investment avenue worth exploring, particularly from an Asian market perspective.
The Essence of Hedge Funds
At its core, a hedge fund is an investment fund that pools capital from accredited individuals or institutional investors and invests in a variety of assets with the aim of achieving positive returns through various strategies, regardless of market conditions. Unlike mutual funds, which often have restrictions on their investment choices, hedge funds are known for their flexibility, employing a broad spectrum of strategies that can include leveraging, short selling, or using derivatives.
A Historical Glimpse
The inception of hedge funds can be traced back to 1949, when Alfred Winslow Jones created what he called a “hedged fund,” combining short selling with a…
