![]() Other than a fund's regulatory status, there are no formal or fixed definitions of fund types, and so there are different views of what can constitute a "hedge fund".Īlthough hedge funds are not subject to the many restrictions applicable to regulated funds, regulations were passed in the United States and Europe following the financial crisis of 2007–2008 with the intention of increasing government oversight of hedge funds and eliminating certain regulatory gaps. This means they typically allow investors to invest and withdraw capital periodically based on the fund's net asset value, whereas private-equity funds generally invest in illiquid assets and only return capital after a number of years. They are also considered distinct from private equity funds and other similar closed-end funds as hedge funds generally invest in relatively liquid assets and are usually open-ended. Their ability to use leverage and more complex investment techniques distinguishes them from regulated investment funds available to the retail market, commonly known as mutual funds and ETFs. Hedge funds are considered alternative investments. ![]() Financial regulators generally restrict hedge fund marketing to institutional investors, high net worth individuals, and accredited investors. ![]() A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction, and risk management techniques in an attempt to improve performance, such as short selling, leverage, and derivatives.
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