The Global Capital System

With the unprecedented technological advancement and global political pressures in the second half of the 20th century came a change into how people invested their money. Where before the global capital system was a domain of government, running mainly on transfer payments, private institutions and individuals have slowly increased their participation in this market as globalization and trade become the rallying points in global development.

The Global Capital System
Initially the Global Capital System was an extension of the US financial framework, this mainly owing to its dominance of the world economy right after World War II. Capital flows came in the form of credits and grants under the Marshall Plan to rebuild the economies of Western Europe. Yet political pressures, economic development and regulatory practices of the period eventually lead to the development of the private sector giants, businesses and individuals that have slowly displaced the lead role of governments in the international financial markets.

The main difference between the international financial markets and a closed economy is the introduction of currency as an asset class by itself. Where in the latter your average portfolio manager has a choice between bonds, commodities, and equities as an investment venue now currencies of themselves do not merely facilitate a transaction but become a speculative instrument where profit is made from the fluctuation of exchange

FrexGen | Hedge Funds

In the securities world, the term "Hedge Fund" does not necessarily imply any use of "hedging" as commonly understood; for example where commodity traders use options to "hedge" a commodity position. Presently, in the securities world the term " hedge fund" refers to any type of Private Investment Company operating under certain exemptions from registration under the Securities Act of 1933 and the Investment Company Act of 1940. "Hedge Funds" are often referred to as "alternate investment vehicles" and are tailored to the needs of sophisticated, high net worth private investors.

A Hedge Fund is generally structured as a limited partnership having a general partner responsible for the investment activities and day-to-day operation of the fund, and limited partners who are the investors supplying capital but not participating in trading or operations of the fund. The limited partners have limited liability. That is, their exposure to loss is limited to their investment. The General Partner has unlimited liability and is liable for the activities of the partnership. The General Partners principals limit their liability through the use of a corporation or limited liability company as the General Partner.