The term “Hedge Fund” often sounds mysterious, but the core concept is straightforward. A hedge fund is a type of AIF that aims to generate positive returns regardless of whether the overall market is going up or down. They are called “hedge” funds because they often use strategies to hedge, or protect against, market downturns.
To achieve this, managers use a wide array of advanced tools and strategies, such as short-selling (betting that a stock will go down), using leverage (borrowing to increase investment size), and trading derivatives. Because of their complexity and aggressive nature, hedge funds are suitable only for experienced investors who are looking for absolute returns and are comfortable with the associated high risks.
