Funds that use hedging trading methods are called hedge funds, also known as hedge funds or hedging funds. It refers to financial funds that combine financial derivatives such as financial futures and financial options with financial instruments for the purpose of profit.

1. Hedge fund, which is a form of investment fund, means "risk-hedged fund". Hedge funds use various trading methods for hedging, transposition, hedging, and hedging to make huge profits. These concepts have gone beyond the traditional scope of preventing risks and ensuring returns. In addition, the legal threshold for launching and establishing a hedge fund is much lower than that of a mutual fund, further increasing the risk.

2. In order to protect investors, North American securities management agencies have listed it as a high-risk investment product and strictly restricted the intervention of ordinary investors. For example, it is stipulated that each hedge fund should have less than 100 investors, and the minimum investment amount is US$1 million, etc. Financial futures and financial options are called financial derivatives, and they are usually used in financial markets as a means of hedging and avoiding risks.

3. As time goes by, in the financial market, some fund organizations use financial derivatives to adopt a variety of investment strategies for profit. These fund organizations are called hedge funds. Hedge funds have long lost the connotation of risk hedging. On the contrary, it is now generally believed that hedge funds are actually based on the latest investment theories and extremely complex financial market operating skills, making full use of the leverage effect of various financial derivatives, taking high risks, pursuing High-yield investment model.

Extended information:

What are the characteristics of hedge funds?

1. Complex investment activities: Various financial derivatives such as futures and options have gradually become the mainstay of hedge funds. Main operating tools. These derivatives were originally designed to hedge risks, but due to their low-cost, high-risk, and high-return characteristics, they have become a powerful tool for many modern hedge funds to engage in speculative behavior. ?

2. The investment effect is highly leveraged: Typical hedge funds often use bank credit to expand their investment funds several times or even dozens of times based on their original fund amount with extremely high leverage borrowings. , so as to achieve the purpose of maximizing returns. The high liquidity of hedge funds' securities assets allows hedge funds to easily use fund assets to make mortgage loans. ?

3. The financing method is private equity: the organizational structure of hedge funds is generally a partnership. Fund investors join with funds and provide most of the funds but do not participate in investment activities; fund managers join with capital and skills and are responsible for the fund's investment decisions. Due to the high risks and complex investment mechanisms of hedge funds, many Western countries have prohibited them from soliciting funds from the public to protect the interests of ordinary investors. ?

4. The operation is secretive and flexible: Hedge funds can use all available financial instruments and combinations to maximize the use of credit funds in order to obtain excess returns higher than the average market profit.

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Reference: Hedge Fund-Baidu Encyclopedia