Hedge funds are investment vehicles that pool capital from accredited investors or institutional investors and use a variety of strategies to earn active returns, or alpha, for their investors. They are known for their complex strategies, high-risk/high-reward profile, and the sophisticated nature of their operations. This guide will explore what hedge funds are, their various strategies, the associated risks, and the opportunities they present. It aims to provide a thorough understanding of hedge funds and their role in the investment landscape, using real-world examples to illustrate key points.
Hedge fund definition: A hedge fund is a pooled investment fund that employs diverse and often complex strategies to earn returns for its investors. Unlike mutual funds, hedge funds are typically open only to accredited investors due to their higher risk profile and regulatory requirements.