Pool of money for high net-worth investors. Less strategy restrictions than mutual funds and more risk. High management feesExample: Citadel
hedge funds
The pool of money you are referring to is a hedge fund. Hedge funds are typically exclusive investment vehicles for high net-worth individuals or institutional investors such as pension funds and endowments. These funds are managed by a professional hedge fund manager who seeks to generate maximum returns for investors using a variety of investment strategies.
Unlike mutual funds, hedge funds have fewer restrictions on the investment strategies they can use and can invest in a wide range of instruments such as stocks, bonds, derivatives, and commodities. This flexibility allows the hedge fund manager to generate returns by exploiting market inefficiencies or taking advantage of price movements in these instruments.
However, this flexibility comes with higher risk. Hedge funds employ leverage, short selling, and other complex strategies that can result in higher volatility and more significant losses than traditional investment products. Hedge funds also charge higher management fees, often 2% of assets under management and a 20% performance fee when the fund generates positive returns.
Citadel is a well-known hedge fund that manages assets worth over $32 billion. It employs over 1,500 people globally and uses quantitative and fundamental investment strategies to generate returns for its investors. With its significant investments in technology and data analytics, Citadel is known for its sophisticated trading and risk management practices.
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