FRM Financial Risk Manager Practice Test

A venture capital fund, a private equity fund, a commodity pool, and real estate partnership are not considered “hedge funds.” The reason is that by definition, hedge funds generally take leveraged positions in publicly traded equity, debt, foreign exchange, and derivatives. Therefore, those funds above do not match the definition of hedge funds.

Key takeaway: Hedge funds are normally for the super rich and sophisticated investors, who possess great investment knowledge. By law, these investors must earn a minimum amount of money every year, and their net worth must be more than S1 million in order to become members of a hedge fund.