A hedge fund is an investment pool contributed by a limited number of partners (investors) and operated by a professional manager(s) who employ different strategies to earn an active return, or alpha, for their partners.
This pooled investment structure is often organized as either a limited partnership or a limited liability company.
- Often follow a relatively broad range of investment strategies that are not subject to borrowing and leverage restrictions (with many of them using high levels of leverage).
- Often have a different regulatory treatment from that of institutional investors and typically cater to high net worth individuals or institutions.
- Often hold long and short positions in various markets, asset classes, and instruments.
- Frequently use derivatives for position-taking purposes.