Many people refer to “private funds” and “hedge funds” as being the same thing. In the strictest sense a hedge fund utilizes investment strategies that “hedge” against market direction movements. Investment strategies such as being long and short in similar securities, hoping to take advantage of the relative valuations of those securities rather than the macro movements of the securities markets, might be prevalent. In theory a hedge fund performance is derived from the inefficiencies of the relative valuation of individual securities or market sectors generates the fund’s investment return, rather than upward or downward movement of the securities markets as a whole.
