A private investment fund, often aggressively managed with the goal of generating high returns. Similar to a mutual fund in that it is professionally managed, however, it is more flexible in investment strategies and usually unregulated as they cater to sophisticated investors.
U.S. regulations restrict hedge fund participation to certain classes of accredited investors. Because hedge funds are not open to the general public, the funds are often exempt from some regulation. Typical investment strategies include leveraged, long, short and derivative positions in both domestic and international markets. Usually set up as private investment partnerships with a limited number of investors and a large initial investment.