A Hedge Fund is a pooled investment vehicle that is privately organised and is administered by professional investment managers for investors who have experience of alternative, unregulated investments. This investment vehicle is not generally considered suitable for private investors. It is different from another pooled investment fund, the unit trust fund, in that hedge funds are able to sell securities short and buy securities on leverage, which is consistent with their typically short-term and high risk oriented investment strategy.

A Hedge Fund is a fund that can take both long and short positions, use arbitrage, buy and sell undervalued securities, trade options or bonds, and invest in almost any opportunity in any market where it foresees impressive gains at reduced risk. Hedge fund strategies vary enormously - many hedge against downturns in the markets - especially important today with volatility and anticipation of corrections in overheated stock markets. The primary aim of most hedge funds is to reduce volatility and risk while attempting to preserve capital and deliver positive returns under all market conditions.

Many, but not all, hedge fund strategies tend to hedge against downturns in the markets being traded. Hedge funds are flexible in their investment options (can use short selling, leverage, derivatives such as puts, calls, options, futures, etc.).

For more information on Hedge Funds please visit the Hedge Fund Association website.