Hedge Funds

4018 words 17 pages
Hedge Funds

Instructor: Dr. F. Beer

By: Vishal Pahuja | Angel Cardoz |

Contents Introduction by Vishal Pahuja 3 History by Vishal Pahuja 4 Types of Hedge Funds by Vishal Pahuja 4 Key Characteristics of a Hedge Funds by Vishal Pahuja 5 Size and Market Statistics by Angel Cardoz 5 What is the Cost? by Angel Cardoz 6 Cost to manage 6 Cost to Economy 7 Risks and Returns by Vishal Pahuja 7 Hedge Fund Structure by Vishal Pahuja 8 A Success Story by Vishal Pahuja 9 Peer Evaluation 9 Pay for Hedge Fund Managers 9 A Failure Story by Angel Cardoz 10 Long-Term Capital Management 10 The Rise 10 The fall 10 The future of hedge funds by Angel Cardoz 11 Regulation 11 Markets 11 Bibliography by Vishal
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You see this as an opportunity, how? This is how. You call a friend who keeps rice all time for his personal use. You say, “Friend, I am really in need of rice, can you give me a pound? I promise I will give it back to you in as soon as I can” and you sell that rice in the market for 20$ a pound (shorting or short selling). At the same time, you also buy a pound of bean from the market at 4$ a pound. Now you hold the beans and continue to monitor the market. You know rice and beans always go together so the prices are bound to change. One fine day, rice is selling for 10$ and beans are selling for 9$ as always. You then buy the rice to give it back to your friend and sell the beans you bought at 4$. You make 5+10=15$ a pound in this process.
Hedge Funds are more than often confused with Hedging. Hedging is a technique that is used by hedge funds, that is they offset exposure to price fluctuations in some opposite price fluctuations in some opposite position in another market with the goal of minimizing one's exposure to unwanted risk.
History
Hedge fund is an investment fund with one idea in mind, and that is to minimize the risks and maximize the market potential. The history of Hedge Funds has been traced long back into history. The story goes back to a tale told by Aristotle n which the philosopher Thales bet on a bumper olive crop. Thales cannily wrangled with the owners of olive presses

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