Hedge fund

Investment fund (private, unregistered investment pool) usually used by wealthy individuals and institutions, which is allowed to use aggressive strategies that are unavailable to mutual funds, including selling short, leverage, program trading, swaps, arbitrage, and derivatives. The manager of a hedge fund takes long and short positions (buying and selling short), which reduces overall exposure to the market (market neutral), using leverage and cushing risks to enhance performance. Most funds borrow securities to enable short selling and use leverage to enhance returns. The aim is to obtain absolute performance, minimising dependency on the bond and equity markets. Hedge funds face few restrictions on their portfolios and transactions. For example they are exempt from many of the rules and regulations governing other mutual funds, which allows them to accomplish aggressive investing goals.

As with traditional mutual funds, investors in hedge funds pay a management fee; however, most hedge funds also collect a percentage of the profits.
The funds are mostly investment pools, typically organized as private partnerships and often resident offshore for tax and regulatory purposes.