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Hedge fund manager1/31/2024 ![]() ![]() When hedge fund goes short, it’s betting that the price of the shares will drop before it buys them back again. Short selling, or “going short” involves first borrowing shares (or some other security) and then selling them into the market before buying them back again at some point in the future. So, how do hedge funds make money in a falling market? By “short selling.” This means they seek to make money by investing in things that are falling in price as well as things that are rising. – They try to ensure that they can make good returns in any market. Unlike so-called “long only” asset management funds (which we cover elsewhere in this guide), which make money by investing in products that are rising in price, the term “hedge fund,” comes from the fact that hedge funds try to ‘hedge’ their bets. Their clients used to be wealthy individuals, but are now far more likely to include large pension funds too. In the U.S., it’s Chicago or Connecticut, or – increasingly – Miami. In London, Mayfair is hedge fund territory. They’re typically based in different locations to investment banks. Hedge funds used to be the Wild West of banking but have now become far more institutionalized. Large hedge funds are increasingly running their own graduate recruitment schemes.Hedge funds used to be scrappy outsiders but have become far more institutional.Hedge funds are asset management firms, but with the freedom to follow more creative investment strategies.Hedge fund jobs can be some of the most lucrative in finance.
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