Hedge funds are managed portfolios aimed to generate high returns by using aggressive investment strategies. Hedge funds, despite the misleading name, aims to get the biggest bang for an investor’s money. It engages in practically any investment instrument in the foreign exchange market, from spot to futures to swaps.
According to a statistical survey done by Greenwich Associates, Hedge funds account for around 20% of the global volume traded in currency trading. In fact, hedge funds are considered as the primary driver of growth in currency trading volumes.
To give you an idea on how fast the hedge fund industry is growing, here are some numbers. Twenty years ago, there were only around a hundred hedge funds with about forty billion dollars in assets. In the last few years, however, the hedge fund industry just blew up. Now, the total number of hedge funds under management has risen to more than 10,000 with assets amounting to almost 1.5 trillion dollars. Some say that hedge funds are so powerful that they could overpower currency intervention practices of central banks.