HEDGE FUNDS AND STRUCTURED PRODUCTS PROFESSIONAL ENGLISH IN USE FOR FINANCE

 

PROFESSIONAL ENGLISH IN USE FOR FINANCE 37. HEDGE FUNDS AND STRUCTURED PRODUCTS

 

A Hedge funds Hedge funds are private investment funds for wealthy investors, run by partners who have made big personal investments in the fund. They pool or put together their money and investors’ money and trade in securities and derivatives, and try to get high returns whether markets move up or down. B Leverage, short-selling and arbitrage Most hedge funds use gearing or leverage, which means borrowing money as well as using their own funds, to increase the amount of capital available for investment. In this way, the fund can hold much larger positions or investments. Hedge funds invest where they see opportunities to make short-term profits, generally using a wide range of derivative contracts such as options and swaps. C Structured products Investors who do not have sufficient funds to join a hedge fund can buy structured products from banks. These are customized – individualized or non-standard – over-the-counter financial instruments. EXERCISES 37.1 Match the words in the box with the definitions below. Look at A and B opposite to help you. to leverage to take long position to pool to take a short position   1 to put several people’s resources together for shared use 2 to purchase securities, expecting their price to rise 37.2 Are the following statements true or false? Find reasons for your answers in A, B and C opposite. 1 Hedge funds are so named because they protect against losses. 2 Hedge funds use their investors’ money as well as borrowed money. 37.3 Read the advertisement for structured products from the UBS website, and answer the questions below. The most widely used structured products can be classified into four broad categories according to their intended purpose. Derivatives are used in order to achieve the desired structures, either in combination with the underlying securities or other derivative securities. The major groupings are: Which group off structured products would use if: 1 you wanted the chance of big returns with only a small investment now? 2 you didn’t want to lose any of your money?

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