Few rules on risky corner of market.Byline: Sherri Buri McDonald / The Register-Guard Hedge funds hedge fund, in finance, a highly speculative, largely unregulated investment device. Originating in the 1950s, the funds "hedge" by offsetting "short" positions (borrowing a security and then selling it at a higher price before repaying the lender) against "long" are loosely regulated private investment partnerships that can make investments that mutual funds are barred from making. They can invest in many kinds of assets, from debt to exotic currencies. They can sell stock short - selling borrowed shares in hopes of replacing them later with shares bought at lower prices, and pocketing the difference. They can leverage, or borrow money, enabling them to invest far more than what shareholders have put in the fund. Initially, hedge funds were used by wealthy individuals and institutions, who were thought to be more sophisticated than ordinary investors. But recently, the number and influence of hedge funds have grown. Since 2000, the number of hedge funds worldwide has more than doubled to 8,825, and the assets they manage have also more than doubled to $1.18 million, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Chicago-based Hedge Fund Research. Much of their recent growth has been driven by pensions, endowments and foundations, seeking to diversify diversify To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries. their portfolios and fatten fat·ten v. fat·tened, fat·ten·ing, fat·tens v.tr. 1. To make plump or fat. 2. To fertilize (land). 3. returns. The funds are contro- versial. Advocates say they can help keep share prices in line, add liquidity to the market, flush out bad management and reap good returns for their managers and other investors. But opponents say the funds, which operate largely in secrecy secrecy see confidentiality. , are vulnerable to fraud and incompetence in·com·pe·tence or in·com·pe·ten·cy n. 1. The quality of being incompetent or incapable of performing a function, as the failure of the cardiac valves to close properly. 2. , and a bad bet can quickly turn into a disaster because many of the funds rely on leverage. In recent years, the Years, The the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109] See : Time Securities and Exchange Commission began examining hedge funds more closely and drafted new rules requiring most hedge funds to register with the agency, starting this year. CORRECTION (ran 6/13/2006): A story on Page B6 had an incorrect figure for the assets managed by hedge funds worldwide. The correct figure is $1.18 trillion. |
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