Fundamental Analysis Of Hedge Funds

Abstract

Hedge funds are private investment vehicles that were founded in 1948 by A.W Jones & Co. because of the need of tools which could use different strategies from the existing ones to reduce risk and generate maximum return. Hedge Funds uses great leverage to generate very high return so it make them prone to generating very big losses. Hedge Funds Require Very in depth knowledge of market so thats why not everyone is not allowed to participate in this. People with sufficient financial stability only are allowed to invest in this. Strategy of hedge funds depends on manager’s knowledge ,expertise and investor’s risk and return profile . This depends on various economical ,political and company related factors. Remuneration of a Manager is done in two ways: a fixed management fee and second incentive based on performance of funds. There are several provisions in that of high water mark, hard hurdle rate, soft hurdle rate which determines manager’s remuneration and always pushes him to generate higher profits. Hedge Funds invest in anything that is available to generate arbitrage profits.