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Hedge fund

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To understand what a hedge fund is, we first need to understand what a hedge is.

Hedging refers to two transactions related to the market, with opposite directions, the same amount and breakeven.

Funds that use this hedging method are called hedge funds, also known as hedge funds or hedge funds.

A popular explanation is that such funds make money by hedging risks through securities investment.

for instance

1. The so-called "Lycium barbarum mixed with wine, the more you drink, the more you get" means using Lycium barbarum to hedge the health risks caused by drinking. This punk behavior of "saving while dying" is a hedge.

2. For example, in the classic McDonald's case, in order to ensure profits, McDonald's wants to order chicken for a long time at a fixed price. Suppliers not only want to win McDonald's as a big customer, but also worry about the loss of chicken prices in the future.

So someone came up with a way to divide the price of chicken into three prices: chicken, corn and soybean meal. The price of chicken has not changed much, and corn and soybean meal are the main factors affecting the price of chicken.

Therefore, chicken suppliers are advised to buy corn and soybean meal futures. No matter how the price of corn and soybean meal fluctuates, it can be offset by futures, thus raising a long-term stable chicken price for McDonald's.

These cases are hedging, and funds that take similar measures are hedge funds.

High lever

Hedge funds can use bank credit loans to expand their investment funds several times or even dozens of times on the basis of their original funds, so as to maximize their returns. Similarly, it is precisely because of the leverage effect that hedge funds will face the risk of huge losses in the case of improper operation.

Direct sales when issuing bonds

The organizational structure is generally partnership. Fund investors join with funds, providing most of the funds but not participating in investment activities (only paying money but not contributing): fund managers join with funds and skills (giving part of their money and contributions, with decision-making power), and are responsible for fund investment decisions.