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Thursday, February 9th, 2012

What are Hedge Funds?

A Hedge Fund is a term that applies to any investment pool that is unregulated by their respective country's market regulators. They have existed a  haven for the rich for more than 50 years but came into popularity after the 2000-2002 financial market meltdowns as investors sought new ways to make money.

Though they come in hundreds of varieties, the integral concept for many hedge funds is the ability to use low cost leverage to amplify returns from small movements in any instrument. Foreign exchange contracts are very amenable to this concept since currency moves in small amounts, often predictably, and the markets can handle huge amounts of leverage.