A hedge fund is an investment fund that pools capital from a limited number of accredited individual or institutional investors and invests in a variety of assets, often with complex portfolio construction and risk management techniques. It is administered by a professional management firm, and often structured as a limited partnership, limited liability company, or similar vehicle. Hedge funds are generally distinct from mutual funds as their use of leverage is not capped by regulators and distinct from private equity funds as the majority of hedge funds invest in relatively liquid assets.
Hedge fund strategies are generally classified among four major categories:
-global macro (take sizable positions in share, bond or currency markets in anticipation of global macroeconomic events in order to generate a risk-adjusted return)
-directional (use market movements, trends, or inconsistencies when picking stocks across a variety of markets)
-event-driven (concern situations in which the underlying investment opportunity and risk are associated with an event)
-relative value (arbitrage - take advantage of relative discrepancies in price between securities)
A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. While there is no legal definition of the term "mutual fund", it is most commonly applied to so-called open-end investment companies, which are collective investment vehicles that are regulated and sold to the general public on a daily basis.
An exchange-traded fund (ETF) is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day. Most ETFs track an index, such as a stock index or bond index. ETFs may be attractive as investments because of their low costs, tax efficiency, and stock-like features.Explore Best ETFs 2016