Hedge Funds And Its Strategy Classifications - 992 Words

Introduction As of 2014, more than 11,000 hedge funds are managing more than $2.6 Trillion in assets (De Pol, 2015). The statement itself speaks how important these hedge funds are in the global financial market. They provide investors with opportunities to achieve gains and manage risks. Hedge funds provide liquidity and make financial markets more efficient. These funds can be operated with extreme flexibility and play an important role in financial innovation and reallocation of financial risk (Rubin et al, 1999). Although it sounds good, hedge funds took a hit during the 2008 crisis. Along with the credit crisis came Madoff fraud, the biggest investment scam in 2008. Investors started looking at these funds as high risk, highly leveraged investment vehicles that lacked transparency. Since mid-2009 hedge funds have picked up and strategies are being improved for better risk management, transparency and gaining confidence of investors. The article will give a brief overview of Hedge Funds and its strategy classifications. Then it will particularly describe â€Å"Event Driven† strategy and the market risks associated with it. Hedge Funds A hedge fund can be defined as a pool of investment vehicles that is actively managed and is open only to a limited group of investors and whose performance is measured in absolute return units (Connor and Woo, 2003). Hedge funds are private investment partnerships that require investors to make considerable investments. They are largelyShow MoreRelatedHedge Funds And Hedge Fund3653 Words   |  15 PagesChapter 2 Hedge funds 2.1 Introduction This chapter gives a brief introduction to hedge funds and hedge fund data. Hedge funds are generally considered as private investment vehicles for wealthy individual and institutional investors. 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