While some hedge funds use hedging as an integral part of their investment strategy, others may not use hedging at all, relying instead on a different investment program. Some funds may use hedging with the sole purpose of pursuing additional returns, a strategy that generally adds risk. The fund’s documents will specify what type of hedging practices the fund uses in its investment strategy.

Not all hedge funds invest in rare, unknown securities that most investors may not know about or consider for their portfolio. Some hedge funds invest in traditional holdings commonly available, such as equities, bonds, and ETFs, as their core investment strategy for the fund. Other funds may use a combination of rare, exotic, or more well known instruments as well as use a hedging strategy to persue higher returns. Investment objectives and styles vary, providing many choices for investors to achieve their goals.

Private hedge funds are exempt from registration and may seem mysterious as a result. However, each hedge fund has an offering document that explains its investing goals, investment strategy, and potential risks associated with the investment. The offering document provides details on how that strategy will be deployed. The most secretive part of hedge funds is that they are marketed only to accredited investors and are not available to the general public.