Hedge Funds

Hedge funds originally started as an equity investment vehicle in which offsetting short and long positions protected the overall portfolio against major stock market moves. Today, the name hedge funds is a misnomer. They are not restricted to equities or just hedging strategies. Hedge funds are private pooled investment vehicles that can invest in a wide variety of products, including equities, fixed income, derivatives, foreign exchange, private capital, and real assets. It is the investment approach rather than the underlying investments that distinguish hedge funds. Many hedge funds operate in all kinds of financial markets by using leverage, short selling, or using financial instruments that are not often used by other similar commingled funds, such as mutual funds. This may result in a very different risk and return profile than owning underlying assets themselves.


The hedge fund industry is in a state of constant change as several hundred new funds are launched each year, with a similar number of funds exiting or being liquidated. While several jurisdictions around the world regulate hedge funds, often they are lightly regulated compared with other investment vehicles.