The losses on a short position are potentially limitless if a security keeps rising, so it’s considered a high-risk activity. That, combined with the fact that many hedge funds employed leverage, or borrowed money, to trade with as they pursued different strategies in different markets around the globe, led regulators to decree that only the most sophisticated investors should be investing in them. Hedge funds would be allowed to try to make money almost any way they wanted, and charge whatever fees they liked, as long as they limited their investors to the wealthy, who, in theory at least,
...more
