A higher risk investment fund often characterised by taking short positions as well as long positions, including speculative positions in derivatives.
Hedge funds operate in a wide range of markets, with a wide variety of strategies.
Many of them are highly leveraged and are typically designed for more sophisticated investors.
The 'hedge' part of their name originally suggested that they were hedged against any adverse effects from general falls or rises in markets, because of the taking of linked short and long positions by the earliest hedge funds.
This is no longer generally the case.