Which of the following defines a hedge fund?

A hedge fund is accurately defined as a pooled investment fund that employs various strategies to earn active returns for its investors. This means that hedge funds are typically structured to gather capital from multiple investors and then invest that capital using a range of strategies—such as long and short positions, leverage, derivatives, and arbitrage—to generate profit.

Hedge funds are known for their flexibility in investment strategies and asset classes, which allows them to take advantage of market inefficiencies. They often seek to achieve higher returns than more traditional forms of investment, like mutual funds, and do not have the same regulatory constraints. This flexibility is a key characteristic that distinguishes hedge funds from other investment vehicles.

In contrast, a government-backed investment scheme typically refers to initiatives supported by the government, which may not necessarily involve sophisticated investment strategies aimed at active returns. Mutual funds with fixed returns are not representative of hedge funds, as they generally follow more conservative investment strategies and are subject to more stringent regulations. Lastly, a retirement saving plan usually pertains to accounts established for retirement savings, such as 401(k)s, which do not align with the active trading and diverse strategies characteristic of hedge funds.