What is a good response to Hi everyone, Hedge funds are considered a limited partnership and is made of a group of individuals who contribute funds to invest and then use those funds to accomplish various goals. These goals are determined by the group using the hedge fund. Hedge funds are generally started with a high net worth so more results can be made from the investments, however in general hedge funds are known to be risky. Below are three types of hedge funds, but there are also many more (The Investopedia Team, 2024). Activist Hedge Funds are business related, not philanthropic as the name may imply. Activist hedge funds are active in making decisions within the company, such as cutting costs, that will result in an increase in stock price. The increase in stock price is how they gain their money. Enough shares are purchased to gain voting control to persuade boards and management to make the decisions they want made. Careers can be made from this type of fund because of the amount of work put into research, money into buying shares, and then effort trying to enact company changes to result in a higher stock price (DeChesare, 2024). Global Macro Hedge Funds focus on profits directly resulting from large market changes from "political or economic events". These funds can invest in multiple assets as well, but research is done to see what fields and assets will be directly affected by major global events. Some key factors the come to play are currency value, interest rates, and market indexes (Kenton, 2022). Many times the group is hoping for a certain outcome, which means this hedge fund type is very risky. An example of a relevant event for this type of hedge fund was Brexit in 2016 and the upcoming election this year. The goal of a Relative Value Hedge Fund is to exploit differences in similar asset prices. Sometimes a technique called "arbitrage" is used to sell different assets at the same time, which in turn makes the process less risky. I had a harder time understanding when this type of fund would be used and why, but I found it's actually pretty common on the stock market. Another example is a fund who buys and sells debt. (Fernando, 2021).
What is a good response to
Hi everyone,
Hedge funds are considered a limited
Activist Hedge Funds are business related, not philanthropic as the name may imply. Activist hedge funds are active in making decisions within the company, such as cutting costs, that will result in an increase in stock price. The increase in stock price is how they gain their money. Enough shares are purchased to gain voting control to persuade boards and management to make the decisions they want made. Careers can be made from this type of fund because of the amount of work put into research, money into buying shares, and then effort trying to enact company changes to result in a higher stock price (DeChesare, 2024).
Global Macro Hedge Funds focus on profits directly resulting from large market changes from "political or economic events". These funds can invest in multiple assets as well, but research is done to see what fields and assets will be directly affected by major global events. Some key factors the come to play are currency value, interest rates, and market indexes (Kenton, 2022). Many times the group is hoping for a certain outcome, which means this hedge fund type is very risky. An example of a relevant event for this type of hedge fund was Brexit in 2016 and the upcoming election this year.
The goal of a Relative Value Hedge Fund is to exploit differences in similar asset prices. Sometimes a technique called "arbitrage" is used to sell different assets at the same time, which in turn makes the process less risky. I had a harder time understanding when this type of fund would be used and why, but I found it's actually pretty common on the stock market. Another example is a fund who buys and sells debt. (Fernando, 2021).
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