Research Methods for Accounting

Running head: RESEARCH METHODS FOR ACCOUNTING
Research Methods for Accounting
Name of the Student
Name of the University
Author’s Note

1RESEARCH METHODS FOR ACCOUNTING
Table of Contents
Introduction......................................................................................................................................2
What is Hedge Fund........................................................................................................................2
Process to Work of Hedge Fund......................................................................................................3
Advantages of Hedge Fund.............................................................................................................5
Disadvantages of Hedge Fund.........................................................................................................6
Recommendations............................................................................................................................7
Conclusion.......................................................................................................................................8
References........................................................................................................................................9

2RESEARCH METHODS FOR ACCOUNTING
Introduction
At the time of conducting the financial operations of the businesses, the financial
managers of the companies are required to take into consideration many aspects of finance and
accounts. One such aspect is Hedging. Hedging is regarded as a crucial investment position and
the main intention of hedging is the offsetting of the potential losses or gains of the businesses
can be arised as a result of different investment activities and decisions of the companies (Tauser
and Čajka 2014). It needs to be mentioned that the Hedge Fund is an important aspects of the
process of hedging. Hedge fund is considered as an offshore investment fund that is formed as a
private limited partnership and it involves in the speculation to use borrowing and credit capital.
Hence, it is necessary for the business organizations as well as individuals to consider the aspects
of hedge fund in the investment activities (Davies, Kat and Lu 2016). The main aim of this report
is to analyze and evaluate various aspects of hedge funds.
What is Hedge Fund
The above discussion provides a short overview about hedge fund. The follow discussion
provides an in-depth overview about hedge fund.
Hedge fund is regarded as an alternative investment with the use of pooled funds that use
different types of investment strategies in order to earn healthy return for the investors. The
investment managers have the option to manage the hedge funds in aggressive manner in order
to use investment derivatives and it can also be leveraged in both international as well as
domestic market of United Kingdom in order to gain higher return from the investments. In this
context, it is crucial to mention that only the accredited investors can use the hedge funds due to

3RESEARCH METHODS FOR ACCOUNTING
the fact that the requirement for investment related regulations is less for them. In addition, the
presence of less regulation can be seen in the hedge funds as compared to other investment
vehicles like mutual funds (Cao et al. 2013). The following discussion shows certain
characteristics of the hedge funds:
o One major characteristic of hedge fund is that the qualified investors can only be able to
use the hedge fund. For this reason, the Securities and Exchange Commission of United
Kingdom can be considered as deemed qualified to bear the risks related to hedge funds.
o Another major characteristics of hedge fund is that it offers wider investment
opportunities that the other funds (Aragon, Hertzel and Shi 2013).
o In the hedge fund, the investors have the option to use borrowed money in order to
increase the return.
Process to Work of Hedge Fund
In this context, it needs to be mentioned that it is not an easy job to provide description
about how hedge funds work due to the fact that all the hedge funds use different investment
strategies. It is the responsibility of the investors to work out the risks related to the hedge funds
and it largely depends in the intended strategies of hedge funds. However, the presence of some
common facts can be seen in the operation process of hedge funds (Lan, Wang and Yang 2013).
In the operation process of hedge funds, the hedge fund managers have the option for the
use of complex financial tools like the derivatives. In this case, they can use different types of
derivatives like swaps, options and warrants (Davies, Kat and Lu 2016). The involvement of
different types of terms can be seen with the derivatives; like ‘gearing’ and ‘short selling’. In
case of hedge funds, gearing is regarded as the process to make large investments with the help