Hedge Fund

A hedge fund is an investment vehicle managed by a professional entity that acquires securities or other assets using collective funds. Unlike public mutual funds, hedge funds, being private entities, possess more room for risk-taking and advanced strategies due to fewer restrictions. Nevertheless, eligibility for this leniency requires them to restrict their client base to affluent individuals or institutional investors.

Hedge fund managers utilise both traditional investment securities, such as stocks and bonds, and unconventional methods, including short positions and derivatives like options, with the goal of maximising returns while minimising risk. Nonetheless, this aggressive approach makes hedge funds inherently riskier than public funds, such as mutual funds and exchange-traded funds (ETFs).

Hedge fund strategies might incorporate alternative assets like precious metals, commodities, real estate, and art, amongst specific equities and bonds. These strategies can include short selling, volatility trading, arbitrage, and leveraged equity.