The hedge funds are speculative funds that are managed by insurance companies or private entities, which seek precisely to obtain the greatest profit with their operations. The English term hedge refers precisely to a precise strategy, called hedging, which seeks to reduce portfolio volatility and minimize market risks.
Hedge funds aim to be able to produce returns that are constant over time, regardless of market trends at that precise moment. To achieve this objective, market risks are minimized and we try to invest in very profitable assets.
For this reason, hedge funds usually apply the following strategies:
- short selling;
- application of financial leverage;
- investment in binary options and futures.
Hedge funds are also characterized by advanced investment techniques, which are not applied by normal investment funds.
