Hedge funds are often viewed as complex or reserved for high-net-worth investors, but they can be a useful addition to a well-diversified investment portfolio. They offer strategies that differ from traditional investments, aiming to generate returns in various market conditions. This article explains hedge funds in simple terms and explores their potential role in an investment strategy.
Unlike traditional mutual funds, hedge funds have more flexibility in their investment strategies and are often managed with the goal of generating high returns regardless of market conditions. Hedge funds use various strategies such as long-short positions, leverage, derivatives, and arbitrage to maximise profits.