What is hedge fund ?

A hedge fund is an investment fund which is open to a limited range of investors. Those investors are permitted by regulators to undertake activities and also they pay a performance fee to their investment manager. Each fund has its own strategy determining the type and methods of investment.

Hedge funds invest in a range of investments extending over debt, shares, and commodities. Hedge funds try to offset potential losses by hedging their investments with a variety of schemes. On the other hand, the term is applied to many funds including those which do not hedge their investments, and especially to funds using short selling to increase reduce risk. As a rule hedge funds are open to a limited range of wealthy investors. A hedge fund can take both long and short positions buy and sell trade options or bonds, undervalued securities, and invest in any opportunity in any market. Hedge fund strategies are different. Many of them have the ability to generate positive returns in both falling and rising equity.
The main aim of most hedge funds is to reduce risk while attempting to deliver positive returns. Adding hedge funds to your investment portfolio allows you to provide diversification which is not available in traditional investing.