Purpose of Hedge Funds

The primary purpose of hedge funds is to invest to maximize returns and mitigate market losses through diversification across different asset classes.

What is a hedge fund?

Registering a hedge fund as a limited liability partnership allows the pooling of funds from private investors. This collective investment vehicle can utilize various risky strategies, including leverage and trading in non-traditional assets. 

Hedge funds typically only accept money from accredited investors. They focus on alternative investments in land, real estate, stocks, derivatives, currencies, and other assets. A professional manager often hedges the fund's positions to protect them from market risk.

Examples of hedge funds with significant assets under management are Bridgewater Associates ($124 billion), Renaissance Technologies ($106 billion), and AQR Capital Management (over $94.5 billion).