To understand what a hedge fund is, we must first understand what a hedge is: a hedge refers to two transactions that are related to the market, have opposite directions, have the same amount and break even. 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. Mainly understand two key words, asset portfolio and risk hedging. For example: For example, I especially like eating hot pot, but eating hot pot is particularly easy to gain weight, so I thought of a way to go out and run 10 km after eating hot pot to hedge the risk of gaining weight. Another example is the classic McDonald's case. In order to ensure profits, McDonald's wants to order chicken at a fixed price for a long time. 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.

Hedge funds have two characteristics that need special attention: 1. High leverage: 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.

2. Private placement: The organizational structure is generally partnership. Fund investors buy shares with funds, provide most of the funds but do not participate in investment activities (only pay money without contributing); The fund manager joins in with funds and skills (pays part of the funds and efforts and has the decision-making power), and is responsible for the investment decision of the fund. Because hedge funds require higher concealment and flexibility in operation, the risk is relatively high, and the number of people is generally controlled below 100, and the capital contribution of each partner needs to be above 100.