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  1. #1
    vil is offline VIP Member
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    volatile world of hedge funds

    Dear teacher,

    I read in an article in IHT a sentence, which contains a few confused for me words. (Please see the words in bold below).

    "An unfolding drama over the estate of Seth Tobias is providing a lurid account of fast money and faster living in the volatile world of hedge funds."

    In my humble opinion, there is a sound reasoning by the word-formation in English language. Or to be more precisely "should be" such a sound reasoning.

    I have heard something about mutual funds. (mutual - held in common, share by two or more persons forming a group, mutual interest that is shared by two or more persons.) an opened investment trust company).
    And here emerged the term "hedge funds", and what is more, the expression "volatile world of hedge funds", and a little while ago "A life of private jets and black-tie balls ended with Set Tobias, a wealthy investment manager and a familiar presence on SNBC , floating face down in the swimming pool of his mansion here." I proposed to couple the term "hedge" with the meanings as "doubtful", "problematic","questionable", "suspicious", "fishy", or "low-grade" "inferior", "despicable". but the dictionary directed my attention towards the meanings as "hedging", "futures contract", reducing risk by covering the possibility of a fall in the value of certain securities it holds by also holding securities that will probably rise in value".

    In addition, there is another ambiguous word "volatile" which conduced for the things went wrong.

    Would you be so kind to explain to me the interpretation of this confused expression?

    Thank you in advance for your efforts.

    Regards.

    V.
    Last edited by vil; 04-Dec-2007 at 18:27.

  2. #2
    Naamplao is offline Senior Member
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    Re: volatile world of hedge funds

    Quote Originally Posted by vil View Post
    Dear teacher,

    I read in an article in IHT a sentence, which contains a few confused for me words. (Please see the words in bold below).

    "An unfolding drama over the estate of Seth Tobias is providing a lurid account of fast money and faster living in the volatile world of hedge funds."


    V.
    You are rambling here so I will deal just with aspect of your question.

    Mutual funds and Hedge funds are similar in that they are investment instruments which allow an investor to spread their investment risk over a number of companies' stock rather than one or two stocks.

    Say you have only $10,000 to invest. You could buy the stock of say two companies with this money. But your investment would be risky since these shares may rise or fall suddenly.

    In a mutual fund and hedge fund, a pool of money is created by accumulating money from many many investors. The fund would invest across many companies...not just two. So your investment is less risky since you are not dependent on the success of just two companies. You would buy shares in this mutual fund or hedge fund...the price of the shares would reflect the value of the pool of shares and how much money the mutual fund has.

    The difference between a Mutual fund and a Hedge fund is that you know all the details of a Mutual fund. You know who manages the fund, the companies that they invest in and the management fees charged. These funds are required by law to make this information available.

    A Hedge fund is private. No such information is made available publicly. Decisions that are made within this fund are secret. They can engage in stock market practices such as "short selling" and "leverage" which are not allowed in Mutual funds.

    As a result it is difficult as an investor to evaluate a Hedge fund. These practices such as "Leverage" can make a lot of money in a short period of time but in bad times (like those of today's market) the value of a Hedge fund can suddenly plummet.

    As a result investment in Hedge funds are "volatile" meaning they are given to huge swings in value.

    To me this is ironic since the word "hedge" means to protect yourself.

    For example, a manufacturer might use a hedge by purchasing foreign money on the futures market (say a contract for 6 months from now) while the price may be low, rather than waiting until he absolutely requires the money (when the foreign money may cost more). So he is protecting himself here.

    But in typical American marketing hype, they use a word that literally means something positive and make it meaningless.

  3. #3
    vil is offline VIP Member
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    Re: volatile world of hedge funds

    Hi Naamplao,

    Thank you for your masterly explanation. I asseverate that your explanations of the special and general vocabulary used in conducting business, especially the mentioned above confused for me terms, are more detail and more unambiguous than these that are quoted in the Longman Dictionary of Business English.

    Thank you gratefully for the accommodating sharing of a few new for me words, as: "leverage", "plummet" and "hype".

    In conclusion I let my tongue run away to share my exceptional satisfaction that you can't get away from facts, that in the complete expression "volatile world of hedge funds" in the mentioned above context something is wrong and crooked, or to be more precisely, something is distorted.

    Regards.

    V.

  4. #4
    Naamplao is offline Senior Member
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    Re: volatile world of hedge funds

    Quote Originally Posted by vil View Post
    Hi Naamplao,


    Thank you gratefully for the accommodating sharing of a few new for me words, as:

    "leverage" in terms of stocks and securities it means to use your existing portfolio value to borrow money from a stockbroker to purchase more stock without having to pay anything other than a daily interest on the purchase. This is a dangerous practice since in bad times the broker can ask for the full value of the loan immediately and if the debt is not settled, your best stocks will be sold without your permission to cover the debt.

    , "plummet" means to drop suddenly and to a much lower value

    and "hype" is a slang term coming from the word "hyperbole" meaning exaggeration.

    In conclusion I let my tongue run away to share my exceptional satisfaction that you can't get away from facts, that in the complete expression "volatile world of hedge funds" in the mentioned above context something is wrong and crooked, or to be more precisely, something is distorted.

    These funds are not necessarily wrong or crooked, though with secrecy and lack of government scrutiny the possibility of a criminal act is certainly possible.

    The "world of hedge funds" is not for the timid investor. I don't know much about these funds other than it is possible to make a lot of money or lose a lot of money in a short period of time....that is the volatile nature of this investment. There are far safer methods of investing your money.

    Regards.

    V.
    For more reading on the subject I direct you to these sites:

    Hedge fund - Wikipedia, the free encyclopedia

    Mutual fund - Wikipedia, the free encyclopedia

    .........

  5. #5
    vil is offline VIP Member
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    Re: volatile world of hedge funds

    Hi Naamplao,

    Thank you for your touching willingness to give me a leg up. Thank you for the circumstantial explanation of the new words. Thank you for the new links concerning the mentioned above hedge and mutual funds.

    Regards.

    V.

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