Hedge Funds

A specialist leveraged investment fund that engages in trading and hedging strategies, frequently using leverage. It is managed aggressively to get maximum rates of return by using derivatives and swaps, selling short and employing arbitrage techniques. Because of the high risk, and relative lack of regulation, investors in hedge funds have traditionally been drawn from the ranks of high-net-worth private investors or institutions, which have well diversified portfolios and can afford to take on the extra risk. They are now becoming more accessible for private investors in general. The rewards of hedge fund managers are usually heavily geared towards the performance of their funds.