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A hedge fund is an investment fund that uses complex strategies to try and make high returns for its wealthy investors.
In Depth
Hedge funds are privately managed investment funds that are typically open only to accredited investors, meaning those with a high net worth. They employ a variety of sophisticated investment strategies, including short selling, leverage, and derivatives, to generate returns. Unlike mutual funds, hedge funds have fewer regulations and often charge higher fees, typically a percentage of assets managed plus a percentage of profits.
Example
An institutional investor might allocate a portion of their endowment to a hedge fund specializing in global macro strategies.