Hedge funds are pooled investment funds that employ various strategies to earn active returns for their investors. They are typically open to a limited range of investors and often use leverage, derivatives, and short selling to enhance returns. Hedge funds can invest in a wide array of assets, including stocks, bonds, commodities, and currencies, making them versatile in their approach. Unlike traditional mutual funds, hedge funds are less regulated and can take on more risk. They aim to achieve high returns regardless of market conditions, which is why they often attract wealthy individuals and institutional investors looking for diversification and higher potential gains.