Hedge funds’ initial investments are substantial and cannot be withdrawn for at least a year. Managers receive a performance fee and can take advantage of the lighter-touch regulations in comparison to those in an ordinary investment fund. Hedge funds use different methods to reduce potential risk, but their main objective is to maximise returns using a wide range of strategies. Hedge funds operate in domestic and international markets, aiming to generate higher returns on the investment.
Some of the asset classes or strategies exposed to will include: derivatives; emerging markets; aggressive growth; distressed securities; quantitative or discretionary macro. Generally the domain of professional investors with a much higher risk appetite.