Are Hedge Funds Right for You?

They generate a lot of headlines but not great returns. Here’s how to get the best of what they offer and pay a lot less.

What exactly are hedge funds?

They’re private investment funds for the rich. A broader, if somewhat cynical definition comes from hedge-fund manager Cliff Asness, of AQR Capital: “Hedge funds are investment pools that are relatively unconstrained in what they do. They are relatively unregulated (for now), charge very high fees, will not necessarily give you your money back when you want it, and will generally not tell you what they do. They are supposed to make money all the time, and when they fail at this, their investors redeem and go to someone else who has been making money.”

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Bob Frick
Senior Editor, Kiplinger's Personal Finance