To understand what a hedge fund is, it helps to know what hedging is. Hedging means reducing risk, which is what many hedge funds are designed to do. Although risk is usually a function of return (the higher the risk, the higher the return), a hedge fund manager has ways to reduce risk without cutting into investment income.

A hedge fund manager can look for ways to get rid of some risks while taking on others with an expected good return. For example, a fund manager can take stock market risk out of the fund’s portfolio by selling stock index futures. Or (s)he can increase her return from a relatively low-risk investment by borrowing money, known as leveraging. Keep in mind, however, that risk remains, no matter the hedge fund strategy.

The challenge for the hedge fund manager is to eliminate some risk while gaining return on investments — not a simple task, which is why hedge fund managers get paid handsomely if they succeed.”

This is pretty basic information but gives a rough idea about what a hedge-fund manager does. And, a successful hedge-fund manager is essentially a member of the “one percent” — sort of a king in his own right. Note that there are 40 names from the hedge-fund industry in the most recent Forbes’ annual world’s billionaire’s list!

It may well be that our Bobby has the capacity to make it to that list in the fictional world of Billions. How do we know that? Well, Lady Trader points out the series teaser gives hints!

source: Showtime
source: Showtime

Remember this brief scene where Bobby is speaking to an audience — and maybe even looking into the eyes of US attorney Rhoades and stating in a rather cocky way: “The moment I let someone in a government office tell me what I can or cannot buy, I can as well close the shop, but I’m not closing the shop.”

Now, take your eyes off Bobby, if you can, and read the background: Delivering Alpha. Well, thanks to Lady Trader, I now know what a big deal Delivering Alpha is in the world of high finance!