Funds that provide liquidity16 Apr 2018 15:11
Providing liquidity means that hedge funds buy assets or have assets to sell. Markets require liqudity to stay priced accurately - think about any market that fails to price assets accurately - housing, gold, tulips, even groceries - those pricing failures are typically driven by illiquidity - a lack of inventory or buyers. In the stock market - accurate pricing is the most important characteristic of well run, efficient pricing. Without hedge funds buying and selling - it is very possible you could go out to sell a stock and not find a buyer - forcing you to sell at a much lower price than the assets truly reflect or wait days to actually find a buyer.