Question

Hedge funds: What they are? What do they do? Does the name actually say much about what they do, why and why not? Why are they not as tightly regulated?

Answer 1

Hedge funds are collective investment pools run by an investment manager-- but with radically fewer restrictions and less regulatory oversight than, say, a traditional mutual fund. I

There are over a dozen major strategies/styles, but all hedge funds share two traits: they invest in relatively liquid securities (unlike private equity or venture funds, for example), and they practice very active risk management, deploying assets in a way designed to protect the overall fund against big losses.

Since Hedge funds proactively manage the risk by deploying assets in a way designed to protecctthe overall fund against big losses, hence the name Hedge Fund. But, due to many compelexities and speculative investments, these funds can carry more risk than the overall market.

Hedge funds are not tightly regulated becasue they have limited number of investors, all of which must be accredited (meeting strict income and liquidity requirements).