Hedge funds are difficult to define. The category has a startling variety of investment styles, instruments, strategies, fee schemes
and other characteristics. Yet, these generalities apply:
• Hedge funds tend to be private, that is, shares do not trade publicly.

• They tend to be illiquid – investors are not free to take out capital at will.
• They tend to be exempt from many of the regulations and taxes imposed on other investment vehicles.

• They tend to be flexible and to speculate in a wide variety of instruments.

• They tend to use leverage, that is, to borrow in order to boost returns.
• Their managers tend to be extremely well paid. They reap sometimes outlandish amounts, even when they don’t succeed. These fees are quite controversial.