Peering through the opacity
Indices are getting just as complicated and opaque as the industry they were designed to clarify. Dow Jones Indices' director of risk management and research, Francis Gupta, shines some light on the topic
Since the inception of the first hedge fund in 1949, the four basic characteristics of this investment vehicle have largely remained unchanged. These characteristics are
nthe use of short selling to hedge risk,
nthe use of leverage to enhance return,
nmanagers who are vested in the portfolio or investment strategy through the use of their own money, thereby sharing in the risks, and
nthe use of incentive fees that are used to keep the manager's focus on profits.
Many hedge funds now also invest in
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