A hedge fund is a form of investment fund that refers to a “risk hedge fund.
North American securities regulators put it on a list of high-risk investments and strictly limit participation by ordinary investors. For example, each hedge fund is required to have fewer than 100 investors and a minimum investment of $1 million.
The so-called “hedging” is to “wash away” risks at a certain cost in transactions and investments to obtain low-risk or risk-free profits. A hedge fund, as the name suggests, is a fund that adopts a strategy of “hedging” operations.
For example, when a buys a stock at a market price of 100 yuan per share, he will face the risk of a drop in the stock price. Of course, he could also earn income from rising stock prices. But the risk scares him. At this time, he found agreement B, and a month later, regardless of whether the stock rose or fell, he could sell it to him at a price of 101 yuan. In this way, a will rush out of the risky pair. Of course, if the stock price rises more than 101 yuan, a will not get a high return.
There are many ways of hedging, such as futures price difference hedging, far and near contract hedging, geographical hedging of the same product, hedging of related products, and betting agreements, etc.
The characteristics of hedge funds are:
(1) Hedge funds are generally not widely publicized;
(2) There are high standards for investors, who need to have certain net assets;
(3) Specify the minimum investment amount, and the investment amount of a single hedge fund is usually greater than 1 million;
(4) To collect management fees and performance fees;
(5) There is a lock-up period for funds, which can only be withdrawn on a specified date
(6) The hedge fund sponsor or fund management company will invest part of the funds in fund products ;
(7) High risk, etc.