TLDR:
A hedge fund is an alternative investment fund that uses pooled capital from accredited investors to pursue high-return strategies including leverage, short selling, derivatives, and arbitrage, typically targeting absolute returns.
Hedge Fund Strategies
Hedge funds employ a wide variety of investment strategies that can be broadly categorized as: (1) Long/Short Equity — buying undervalued stocks while shorting overvalued ones; (2) Global Macro — taking large positions based on macroeconomic trends and geopolitical events; (3) Event-Driven — capitalizing on corporate events like M&A, bankruptcies, or spin-offs; (4) Arbitrage — exploiting price discrepancies across markets or securities; and (5) Quantitative — using algorithmic models to identify and execute trades. The ability to use leverage, short selling, and derivatives distinguishes hedge funds from most other investment vehicles.