Hedge funds have exploded in numbers since the 2000s. However, their growth has slowed down significantly in recent years due to shifting market conditions in an unstable global economy and stiff competition from private banks, investment firms, and private portfolio managers in the high-net-worth sector. However, despite this slowdown in growth, the more than 30000 strong hedge funds industry continues to hold a significant share of global assets under their management. This article provides insight into what hedge funds are, how they invest in, and how they fit into the portfolios of family offices and other wealth management institutions across the globe.
What are Hedge Funds?
A hedge fund is an offshore fund that is designed as a “pooled” investment vehicle and structured as a limited partnership of a fund manager and the investors who contribute to its operations and management. Hedge funds typically trade in public markets like securities and employ aggressive strategies like the long/short equities model where stocks are not only held for long-term value appreciation but also shorted during periods of market instability to benefit from momentary changes in their value.