What is the purpose of a hedge fund?

The primary purpose of a hedge fund is to maximize returns through a variety of diverse investment strategies. Hedge funds are known for their ability to employ a wide range of tactics, including long and short positions, leverage, derivatives, and arbitrage opportunities. This flexibility allows hedge fund managers to pursue higher returns than traditional investment vehicles, which often have stricter regulations and more limited investment strategies.

In essence, hedge funds aim to generate high returns for their investors by actively managing their portfolios and exploiting market inefficiencies. Their strategies can include investing in stocks, bonds, currencies, and commodities, as well as employing sophisticated trading tactics that might not be accessible to typical retail investors. This pursuit of higher returns is their defining characteristic, distinguishing them from other types of investment funds that may focus more on capital preservation or income generation.

The other options, while they may describe activities or characteristics associated with different investment vehicles, do not accurately capture the core goal of hedge funds.