Questions on Hedge funds, PE and prop shops

bIastoise:

Hey msgs,

I think you are definitely very green in your knowledge but hey we all have to start somewhere right? I'll give you a quick rundown but I think wikipedia definitely provides a better explanation so I would recommend checking that out.

Hedge funds are typically unregulated asset managers. They are VERY diverse - one hedge fund is incredibly different from another hedge fund. Strategies include risk arbitrage (betting on mergers), distressed debt (buying companies that are going bankrupt in the hope for recovery), macro (betting on the world's markets), and quantitative (using computer models to predict markets). To say you want to start a hedge fund is a very naive statement and it is very difficult to do so. I would recommend working in the industry and learning how it works before even considering starting one; many successful hedge fund portfolio managers have had little success starting their own fund.

Private equity is a bit different. Instead of buying stocks and bonds, they buy entire companies or a large portion of a company and make improvements such as firing unnecessary workers, merging various companies together, or expanding market share. They tend to be more business focused while HFs tend to be more market focused, although the line is blurring between the two (e.g. distressed debt hedge funds that buy debt in the hopes of a bankruptcy, after which they own the company and try to improve it).

Hope that helps! It can be very difficult starting out to understand everything so please don't be discouraged by people on here! Although I would recommend reading wikipedia, investopedia, etc. as a start before asking questions on here that can be answered by a quick google search!

don't feed the troll, moron