Hedge funds are investment funds made up of pooled resources that specialize in liquid assets. It uses sophisticated financial mechanisms to generate higher returns than the larger market while also mitigating the risks of failure. Because of the kind of investments they make, hedge funds are distinct from other asset managers and funds. Hedge funds are often for high-net-worth individuals with high investment criteria. While hedge funds might be dangerous at times, they often deliver a positive return on investment regardless of market conditions. With over $3 trillion in assets under management, hedge funds are a substantial element of the financial system. In 2020, the top 20 hedge fund managers will have made $63.5 billion for their investors. This is the best performance in a decade and fantastic news in an uncertain time. GameStop Corp. is a video game, console, and accessory retailer with stores across the United States. Hedge funds worth billions of dollars have opted to short-sell GameStop Corp shares in order to profit from the firm’s decline. Reddit users decided to “fight back” by investing substantially in the stock, which saw it climb by more than 400%. Hedge funds suffered millions in losses as a result of this. In 2012, Bill Ackman lost $1.0 billion on a $1.0 billion short bet on Herbalife Nutrition Ltd. Even the most successful investors make mistakes, and some of them are spectacular. Warren Buffett has admitted to making a number of poor mistakes that have lost him a lot of money.
Insider Monkey takes a look at the biggest hedge fund failures starting with number 10: Marin Capital was situated in California and had a capital base of at least $1.7 billion. To essentially wager on General Motors Company, it used intricate financial arrangements such as credit arbitrage and convertible arbitrage. Aman Capital was supposed to be a big Singapore hedge fund. Instead, the fund’s credit derivatives transactions resulted in significant losses. After big wagers on derivatives failed to produce, the fund lost more than $6.5 billion. Amaranth Advisors has roughly $9 billion in assets under management. Pequot Capital had a great run in the early 2000s, with double-digit gains. In 2010, it was fined $28 million for insider trading by hedge fund employees. Back in 2009, the Galleon Group had $7 billion in assets under management. At least 50 individuals have also been found guilty or have entered guilty pleas in connection with the conspiracy. For more details, click 10 Biggest Hedge Fund Failures.