What Is a Hedge Fund?

With 23 years in the management of investments, brokerage, and hedge funds, Michael Quiel is a managing partner with Legend Asset Opportunity Master Fund, as well as the owner and president of Legend Advisory Corporation. His experience in his profession has enabled Michael Quiel to successfully manage and oversee his company’s Cayman Hedge Fund, in addition to other roles, such as monitoring portfolio risks, managing property purchases, and working with investment strategies. Hedge funds, while often riskier than other investments, such as mutual funds, can pay off well.

A hedge fund is typically only available to high-net-worth individuals or institutions and functions as an alternative mode of investment. Created in 1949, a hedge fund consists of a pool of securities, of which the range of potential for investing in is greater than for a mutual fund. This is largely due to hedge funds being unregulated, which creates fewer restrictions on investments in riskier securities.

A long-short strategy is employed for a hedge fund, meaning stocks are purchased as well as sold with borrowed money and re-purchased when the price falls. Furthermore, a technique called leverage is used, meaning borrowed money is invested in, which can increase the return but also carries greater risks of loss. Hedge fund investors must receive accreditation of a minimum annual income, have a net worth greater than $1 million, and have investment knowledge and experience.

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