Hedging means reducing risk of adverse price movements in a security generally by taking an offsetting position in a related security. So, essentially hedging leads to lower risks.
The term "hedge" was coined by the agriculture industry and farmers were the first "hedgers". They hedged the risk of losing their agricultural produce. Insurance is also a type of hedging method.
A Hedge Fund is fund which can take advantages of any of the hedging strategies, trade in any financial instrument, but produce above average gains at reduced risks. A hedge fund is genrally expected to have positive returns under all market conditions.
Timeline of Hedge Funds
In 1949: Alfred Jones started first hedge fund in the US
In 2005: USD 1 trillion industry with 9,000 Hedge Funds
Oct 2007: Hedge Funds: 2.5 trillion USD
By some estimates the size of Hedge Funds industry has crossed 3 trillion dollars. This is huge when we consider the fact that the total domestic market capitalization of all the stock markets of the world is less than 60 trillion dollars and that of NASDAQ is 4 trillion dollars.
The term "hedge" was coined by the agriculture industry and farmers were the first "hedgers". They hedged the risk of losing their agricultural produce. Insurance is also a type of hedging method.
A Hedge Fund is fund which can take advantages of any of the hedging strategies, trade in any financial instrument, but produce above average gains at reduced risks. A hedge fund is genrally expected to have positive returns under all market conditions.
Timeline of Hedge Funds
In 1949: Alfred Jones started first hedge fund in the US
In 2005: USD 1 trillion industry with 9,000 Hedge Funds
Oct 2007: Hedge Funds: 2.5 trillion USD
By some estimates the size of Hedge Funds industry has crossed 3 trillion dollars. This is huge when we consider the fact that the total domestic market capitalization of all the stock markets of the world is less than 60 trillion dollars and that of NASDAQ is 4 trillion dollars.
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