Monday, August 27, 2007

Explanation of a Hedge Fund


What is the deal with hedge funds?
By John W. Schoen
Senior Producer
Updated: 5:38 a.m. PT Aug 27, 2007

The original ancestors of what we now call hedge funds were a specialized form of investing that placed a very specific kind of bet — looking for opportunities to “hedge” one investment with another. Unlike a mutual fund, which buy stocks and holds onto them hoping they go up, hedge funds also sell stocks short, buy futures contracts to offset risks and use an increasingly complex set of derivatives — a specialized breed of financial instrument, many of which were invented to help investors hedge the basic risks of owning a stock or bond outright....[more]

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