Hedge funds offer the opportunity for higher returns but also entail a correspondingly high degree of risk, as these instruments are not as transparent for the investor as traditional funds. Despite their name (to hedge means to safeguard), hedging transactions are by no means the main purpose of hedge funds. These funds are characterised by transactions which are prohibited for traditional investment funds. These include short selling securities, raw materials or foreign currency, arbitrage, stock market transactions on credit and the extensive use of derivatives. Private investors usually invest in umbrella hedge funds to improve risk distribution.
German: Hedge Funds (412)
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