What is a common characteristic of hedge funds?

The answer highlights that hedge funds are typically structured to be accessible only to a selective group of investors, often referred to as accredited or qualified investors. This limited access is primarily due to regulatory requirements and the sophisticated nature of the investment strategies employed. Hedge funds utilize a wide range of strategies, including long/short equity, market neutral, arbitrage, and event-driven approaches. This diversity in strategies allows them to pursue returns in various market conditions, thus catering to investors looking for higher risk-adjusted returns.

While hedge funds have certain regulatory requirements, they are generally not as heavily regulated as mutual funds or other investment vehicles, making the first choice less accurate. The notion that hedge funds guarantee returns does not reflect reality, as they carry considerable risk and do not promise profits to investors. Lastly, while some hedge funds may invest in real estate, this is not a defining characteristic of all hedge funds, which have the flexibility to invest across multiple asset classes, making the focus solely on real estate inaccurate. Thus, the unique characteristics of being limited in investor access and employing a broad range of strategies distinctly define hedge funds.