Hedge Fund

A hedge fund is an alternative investment vehicle that pools capital from accredited investors and institutions to invest in a wide range of assets, including stocks, bonds, currencies, and derivatives. Hedge funds use various strategies, such as long/short positions, leverage, and derivatives, to generate high returns. Unlike mutual funds, hedge funds are less regulated and often take more aggressive or speculative positions. They typically charge performance-based fees, such as a management fee and a performance fee.

Example

A hedge fund manager might take a long position in underpriced stocks and a short position in overvalued stocks to profit from market inefficiencies, regardless of overall market direction.