January 11, 2013 by Richard Cox

Those who have saved money are often on the lookout for interesting and profitable investments options. A judicious and a professional investor would first study their investment options carefully and then decide about investing money. A novice investor is likely to feel confused about some financial terms and various facets of the financial world.

Amongst the many financial investments options available, hedge funds are making prominent waves. This is one kind of investment tool that is offered only to a group of investors who comply with specific requirements. When looking to invest, you are required to fill out a lengthy application form that details all of your assets and they must be $1 million or $5 million in investments. Hedge fund managers often make risky investments like derivatives or betting on currency moves. Initial investing has a $500,000 starting point and goes up from there.

Hedge funds are specifically open to those people that have sound investment capabilities. Investors, who are eligible for being a part of hedge funds, are given freedom from various stringent regulations such as short selling of funds, derivatives, funds’ leveraging, liquidity of funds, fee, charges etc. Hedge funds offer the high-profile investors the ability to generate staggering earnings ranging in millions of dollars. A hedge fund is a sought after investment option that dominates the top rung of the investment circles that also include trading of debts and derivatives.

The first investment of hedge funds was made by Alfred W. Jones in the year 1949. This first investor was a financial journalist and believed in the theory of empowerment of individual assets via the process of market performance. A. W. Jones tested this theory and diversified his financial portfolio by buying those assets that would fetch attractive prices; and such assets that would have under-valued prices. In the end, the movement of the price causes some losses however they get absorbed by the surplus gains made when the prices were going stronger and sturdier. The main objective behind inception of hedge funds was to mitigate its chances of meeting losses and thus empower the management of investments to become free of any kind of commercial restrains.

It is often difficult to invest in hedge funds because of the fact that you need significant assets and because there are rules about advertising hedge funds.