Where Do Hedge Funds Get Their Money?

How do hedge funds get money for their investment and portfolio build-up?

Hedge funds get their investment capital from multiple investors. These individuals/corporations offer money to the hedge fund and Equity Hedge Fund in hopes to earn a higher return on their investment.

Further, you may ask, how does the hedge fund earn, though? What strategies does it use to get money for the investors?

The hedge fund or the equity hedge fund gets money for its investors by using the following strategies -

1.       The bull and bear strategy - The hedge funds that use this strategy usually believe in being the bulls or bears of a trade. This means they would buy a position in the financial market if they see a particular asset having the potential to rise and similarly, open a sell position if they find an asset that is dropping in value. This is also applicable in the derivatives market with the help of a call or puts option; these are essentially contracts that give their holders the right, not a compulsion, to sell the underlying asset at a pre-defined price.

2.       The unmoved by the market strategy - Hedge funds, as said in their name, hedge their position in the market. This technically means to open a buy and a sell position simultaneously in an effort to achieve a neutral market exposure. However, do keep in mind that this involves a deep understanding of the financial markets to generate profit out of such an impartial investment strategy.

3.       The strategy of a merger - The majority of hedge funds include this strategy in their investment arsenal. This basically is the buying and selling of shares of a particular company before it is merged with another organization, in the hopes that after the merger, the new entity formed will have a valuation that aligns in the direction of the trade.

4.       The macro strategy - These hedge funds only focus on the macro-economic events and make their investment decisions based highly on the news that causes significant market movements. 

Please Read The Original Post Here: Where Do Hedge Funds Get Their Money?

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