What do investors generally seek from hedge funds?

Investors typically seek active returns from hedge funds through various investment strategies because hedge funds are known for their ability to employ a wide range of investment techniques that aim to generate higher returns than traditional investments. These strategies can include long and short positions, leverage, derivatives, and arbitrage among others. Hedge funds often position themselves to take advantage of market inefficiencies and may invest in asset classes such as equities, bonds, commodities, or real estate, utilizing a level of sophistication and flexibility not commonly found in mutual funds or traditional investment vehicles.

By aiming for active returns, hedge funds attract investors who are looking for opportunities to enhance their portfolios, especially in uncertain economic times or volatile markets. The expectation is often that, while hedge fund investments may carry higher risks, they also present the potential for superior performance, which is a primary reason why investors are drawn to them. This aligns with the typical goals of those who invest in hedge funds, which is to seek higher returns rather than stable or guaranteed outcomes.