Hedge funds as speculators

Just Me | 6:58 PM | 0 comments

Hedge funds as speculators

Hedge funds as speculators

About 70% to 90% of the foreign exchange transactions are speculative. In other words, the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end; rather, they were solely speculating on the movement of that particular currency. Hedge funds have gained a reputation for aggressive currency speculation since 1996. They control billions of dollars of equity and may borrow billions more, and thus may overwhelm intervention by central banks to support almost any currency, if the economic fundamentals are in the hedge funds' favor.


Originally hedge funds started as a way to control market risk. Most speculators agree it is almost impossible to guess where the markets will go tomorrow.
Successful speculators would probably agree. there are a million ways to make money in the markets,  all of them short lived and hard to find.
Once upon a time money managers decided to hedge their risks, buy companies they liked and fade (sell short) companies they didn't. This theoretically allowed them to make a profit and avoid loss regardless of market direction.
Hedge funds were touted as a wealth defense. Very few true hedge funds were created and survived. Hedge funds started drifting toward bias hedeges, a bias toward one side of the market or a bias hedge by asset class.

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