What is a hedge fund?
A: A hedge fund is a pooled investment fund that trades in relatively liquid
assets.
Financial regulators generally restrict hedge fund
marketing to whom?
A: Institutional investors, high net worth individuals, and accredited
investors.
Hedge funds are considered what?
A: Alternative investments.
Their ability to use leverage and more complex
investment techniques distinguishes them from regulated investment funds
available to the retail market, commonly known as what?
A: Mutual funds and ETFs.
They are also considered distinct from private equity
funds and other similar closed-end funds as hedge funds generally invest in
what?
A: In relatively liquid assets and are usually open-ended.
Private-equity funds generally invest in illiquid
assets and only return capital after what?
A: A number of years.
There are no formal or fixed definitions of fund types,
and so there are different views of what?
A: What can constitute a "hedge fund."
The word "hedge", meaning a line of bushes around the
perimeter of a field, has long been used as a metaphor for what?
A: Placing limits on risk.
Early hedge funds sought to hedge specific investments
against general market fluctuations by doing what?
A: By shorting the market, hence the name.
Nowadays, however, many different investment strategies
are used, many of which do not what?
A: "hedge" risk.
During the US bull market of the 1920s, there were
numerous private investment vehicles available to whom?
A: Wealthy investors.
Of that period, the best-known today is the
Graham-Newman Partnership, founded by whom?
A: Benjamin Graham and his long-time business partner Jerry Newman.
This was cited by whom, in a 2006 letter to the Museum
of American Finance as an early hedge fund?
A: Warren Buffett.
Based on other comments from Buffett, Janet Tavakoli
deems Graham's investment firm the first what?
A: Hedge fund.
The sociologist Alfred W. Jones is credited with
coining what phrase?
A: "hedged fund" and is credited with creating the first hedge fund
structure in 1949.
Jones referred to his fund as being "hedged", a term
then commonly used on Wall Street to describe what?
A: The management of investment risk due to changes in the financial
markets.
In the 1970s, hedge funds specialized in a single
strategy with most fund managers following what model?
A: The long/short equity model.
Many hedge funds closed during the recession of 1969–70
and the 1973–1974 stock market crash due to what?
A: Heavy losses.
A hedge fund usually pays its investment manager a
what?
A: A management fee (typically, 2% per annum of the net asset value of the
fund) and a performance fee (typically, 20% of the increase in the fund's
net asset value during a year).