Speculation Funds

Risk management is driven by two emotions: fear and greed. Fear results in selling risk, know as hedging. Hedgers want protection for negative price developments and render possible profitable outcomes. Risk buyers are willing to take risks in search for higher returns and to be exposed to possible losses. To ‘invest’ is to speculate by buying assets in expectation of higher prices (long position) or selling assets that you don’t have to benefit from lower prices (short position).

Hedge funds core activity is to take financial risks in search for profits. Therefore these funds should be re-defined as Speculation Funds.