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Revision as of 17:23, 19 June 2017

The typical hedge fund investment contains derivatives possess high yield and debt from companies considered risks, so they have to pay more to borrow, or their loans sell at discounted rates which means the yield on the return is higher. A person don't use a $1,000 loan as an example, without the pain . company loan rate at 8%, that is a decent comfortable return to their office. Now, if that same company gets behind on the loan as well as the lending institution panics, they might sell it at a 50 percent reduction in the balance to the hedge money. This in effect helps to ensure that not only does the fund get 16 percent interest, howevere, if the company actually pays the loan in full, they develop a 100 percent gain on that money.

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