Which of the following statements best describes hedge funds?
A)Hedge funds are risky, although they may be market-neutral.
B)Hedge funds are open to everyone.
C)Hedge funds have low risk because they hedge their investments.
D)Hedge funds are legal only in Canada, and they are not permitted to operate in Europe or Asia.

Question

Quizplus · Accepted Answer

Hedge funds are known to be high-risk investments, even though they may use strategies to achieve market neutrality. They often use leverage and complex financial instruments, which increases their risk profile.

Answer: B is incorrect because hedge funds are not open to everyone but are generally available only to high net worth individuals and institutional investors.

Answer: C is incorrect because, while some hedge funds may use hedging techniques, not all of them do so. Additionally, hedging does not necessarily eliminate risk, but rather, it helps manage or mitigate it.

Answer: D is incorrect because hedge funds are legal in many countries, including the United States and many European and Asian markets.

Which of the Following Statements Best Describes Hedge Funds