Hedge funds and systemic risk

Hedge funds established with the aim of obtaining the higher return with lower risk and use various financial derivatives to minimize the risks for investors. Hedge funds frequently benefit from short-term market movements.

Hedge funds have developed as a new type of financial intermediaries. Hedge funds, which play an extremely important role in today’s financial markets, are aggressive investment instruments aimed at achieving high returns with low risk. Hedge funds, which are distinguished from other investment instruments, especially traditional investment funds by the number of investors and absolute return target, use highly advanced techniques. Hedge funds, which use derivative market instruments are known to be distant from the control.

Hedge funds play an important role in today’s financial markets. Hedge funds, provide additional funds on the one hand to increase volatility and on the other hand, have negative effects on global financial stability. This kind of funds can assume a complementary role in the markets. In this case, they make the markets liquid. Besides, hedge funds can make speculative movements due to their absolute return targets and these movements affect financial markets negatively.