In sum, hedge funds are called hedge funds because they use a full array of hedging techniques to reduce portfolio volatility. They are becoming increasingly popular, as private ownership of capital expands worldwide and large-scale capital owners seek to preserve their wealth in volatile markets.
The term real money means the money is managed on an unlevered basis. This contrasts with hedge funds, which often manage money using borrowed funds or leverage.
A hedge fund manager is an individual who makes investment decisions on behalf of their clients, called limited partners (“LPs”), using aggressive and sophisticated investment strategies. Hedge fund managers fall into the buy-side within the world of capital markets.
Hedge funds pool money from investors and invest in securities or other types of investments with the goal of getting positive returns.
The world's top hedge funds raked in record profits last year amid a resurgence in stock markets, new analysis showed. The 20 leading fund managers made $67 billion in investor profits in 2023, up from the $65 billion recorded during the pandemic-era rally of 2021.
It's extremely difficult to break into hedge funds, and once you're in, the job is stressful and requires long hours and sacrifices. But if you perform well, you can advance quickly and earn high salaries, bonuses, and carry (the profit share from investment returns) in the process.
Put simply, a hedge fund is a pool of money that takes both short and long positions, buys and sells equities, initiates arbitrage, and trades bonds, currencies, convertible securities, commodities and derivative products to generate returns at reduced risk.
