A privately managed investment fund available only to wealthy investors and institutions, typically requiring a large minimum investment. Hedge funds use aggressive strategies to generate high returns, such as betting against stocks, using borrowed money, or investing in complex securities. They charge higher fees than traditional funds and face fewer regulatory restrictions.
A hedge fund manager might use $100 million from 50 wealthy investors to invest in a mix of stocks and bonds, and also borrow another $50 million to amplify those investments. The manager might also place bets that certain stocks will fall in price. If successful, these strategies could generate large returns, but they also carry greater risk of losses.
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