20 years: Trading & hedge funds
Hedge funds occupy an important place in the asset class spectrum. Unlike traditional asset classes they have the ability to add returns regardless of market direction. This video by Trevor Pugh is a brief introduction to hedge funds, wherein he highlights the important characteristics of hedge funds and also talks about some of its distinguishing features.
Hedge funds occupy an important place in the asset class spectrum. Unlike traditional asset classes they have the ability to add returns regardless of market direction. This video by Trevor Pugh is a brief introduction to hedge funds, wherein he highlights the important characteristics of hedge funds and also talks about some of its distinguishing features.
Finance Unlocked is the video learning platform built for finance professionals.
This content is also available as part of a premium, accredited video course. Sign up for a 14-day trial to watch for free.
15 mins
Hedge funds have unquestionably earned a place in the portfolios of more sophisticated investors. Their use of short selling and leverage helps them to stand out from more traditional investments. They are typically lower than equities, but with reduced volatility, making them a more appealing prospect in many models.
Key learning objectives:
Define short selling
Outline the two major characteristics of hedge funds
Define unencumbered cash
This content is also available as part of a premium, accredited video course. Sign up for a 14-day trial to watch for free.
Short selling is where a fund sells an asset such as an equity which it does not own. It can do this by borrowing the security in order to allow it to make delivery to the buyer. This borrowing is normally done on an overnight basis but can be continually ‘rolled over’ or extended on a daily basis.
The model that describes the relationship between risk and expected return for a security, usually equities.
The expected return is made up of two parts:
This cash is not deployed in the market in any way and serves as a buffer for losses.
This content is also available as part of a premium, accredited video course. Sign up for a 14-day trial to watch for free.