January 12, 2006

Misconception about hedge funds

With the growing popularity of hedge funds, even the misconceptions about this investment category are increasing. A number of investors believe that all hedge funds are volatile and that they use global macro strategies and place large directional bets on stocks, currencies, bonds, commodities and gold, while also using a lot of leverage. In reality, less than 5 per cent of hedge funds are global macro funds. Most hedge funds use derivatives only for hedging or do not use derivatives at all, and many use no leverage at all.

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