A Hedge Fund is an unregulated confidential securities fund in which private clients trust their money to a professional investor (normally someone who is a friend or acquaintance) who trades or invests in securities on a daily basis.  Hedge funds exist because of the reality that the modern securities market is so complex that it is necessary for even sophisticated investors to rely on experts, because, even sophisticated investors normally are busy with other pursuits and are not studying market trends from day-to-day.

Hedge Funds often have nothing to do with "hedging," which is a trading tactic that involves making essentially opposite trades designed to offset, or counter-balance, risks.  Hedge funds are not usually insured, or backed by large institutions, and are not subject to the same SEC rules and regulations under which brokerage houses, or mutual funds, operate. 

While hedge funds are not normally backed by substantial assets or insurance, that does not mean that they get a "free pass" or "get out of jail free" card.  Like all investment professionals, hedge funds, and hedge fund professionals, can be liable for losses that are caused by fraud, recklessness, breach of fiduciary duty, or ordinary negligence. 

If you have questions about a hedge fund, please feel free to give us a call at 1-800-306-6010 or contact us online.