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Des subscribers thank you so much for joining me today on the financial education channel so today we are talking about what is a hedge fund man don’t we all wish we were hedge fund managers we’d all be millionaires and billionaires i’d be sweet but what exactly is a hedge fund a hedge fund is a group of accredited investors that pull money together and that money
Is managed by the general partner which is formally known as the head fund the hedge fund manager only smokes i need to learn how to talk today so why do you have to be an accredited investor and what is it an accredited investor in the first place to invest in a hedge fund it’s because hedge funds are very lightly regulated so in order to invest in it you need to
Be someone that’s very experienced and someone then it’s gonna be hard to take advantage of because your financial knowledge is just kind of up there you’re not just a beginner or whatnot so mutual funds are very heavily regulated and there’s only certain things they can do hedge funds on the other hand or not and their credit and investors someone that has income
Of more than $200,000 per year or someone that has a net worth of well over 1 million dollars per year and that is how you become an accredited investor so basically you’re doing pretty well financially in life that you can take some risk in a hedge fund now hedge funds are more risky than mutual funds they’ll take bigger risk on stocks they’ll allocate more assets
Toward one company than like a mutual fund is a mutual fund they try to more like split things up and try to diversify your risk a hedge fund will go heavy on something and then it’s called a hedge fund because sometimes they’ll hedge their bets so picture this you put a ton of your money you put 20% of your money all in one stock you’re very heavily invested in
That you can minimize your downside risk if you do something like you buy you know a tenth of that money used to buy put options stocke so just in case that stock dropped substantially your put options that will then be worth a great deal of money so now if the stock goes up that’s also great because that’s where the majority your money is so you’re gonna make
A ton of money on that money you’ll lose everything on those put options of course they’ll be pretty much worthless but at least you you know minimized your risk to a certain extent now a hedge fund manager they get two to twenty percent what does that mean if the performance is flat for the year they don’t get you a person one percent of a gain or the hedge fund
Loses money they still get two percent of whatever is in the hedge fund so they still get two percent of it now if they perform great and there’s lots of profits then they get twenty percent of whatever the profits are so imagine having a billion dollars and you make that billion dollars see you double money you had just an extraordinary year so you doubled the
Money that was pulled together there as a hedge fund manager so you had a billion you made another billion you get two hundred million dollars of that billion dollar profit so you can see how these guys make insane amounts of money and some of the big guys still have a hundred billion dollars under assets so there’s certainly a lot of money to be made if you’re
A hedge fund manager and you are a hedge fund manager of a very big fund but that is basically the simplest way possible of what a hedge fund is its money pulled together by accredited investors there’s lots of risk taken they’re not heavily regulated hedge fund managers make two percent no matter what they make twenty percent of all profits that’s really about it
To it if you enjoyed this video was easy to understand give it a thumbs up if you didn’t and don’t watch it again but thank you guys subscribe have a great day
Transcribed from video
What is a Hedge Fund By Financial Education
