Hedge funds are investment portfolios which are aggressively managed using strategies such as leverage, and long and short derivative positions for domestic and international markets. The goal of the hedge funds is to generate high profits amounting to tens of millions or billions.

Legally, these hedge funds are set up by a private investment partnership open for a limited number of investors. These funds require a vast amount of capital for the initial investment. However, the investments are not liquid and the money in the fund cannot be taken out for at least, a year or depending on the agreement between the investor and the trading firm.

Usually, hedge funds are not regulated like the mutual funds for they serve a purpose for the more sophisticated investor. However, in the US, these investors have to be accredited. The investors are expected to have a particular minimum earning a year and should have a net worth of over $1 million for every month of that year. They should also be experienced in investments and trading.

For the layman, the hedge funds are the ‘mutual funds’ of the super uber rich who like to speculate on trade and investment. Those who have no money in excess of the several million have no place in this type of investment. In the Forex trading, the hedge funds are reputed to be owned by aggressive currency speculators where they can speculate up to the tens of billions at one time.

Hedge funds would not be successful if the investment strategies used by the speculators and traders are not sound, or if the profits were less than spectacular. In fact, some Forex traders and brokers would say that these funds are beneficial to the Forex market as they can exploit not only the economic weakness, but they can actually expose a country’s unsustainable financial plight, thereby making the countries realign their currencies to levels which are more realistic and attainable.