Hedge funds are distinct from mutual funds, individual retirement and investment accounts, and other types of traditional investment portfolios in a number of ways. As a class, hedge funds undertake a wider range of investment and trading activities than traditional long-only investment funds, and invest in a broader range of assets, including equities, bonds and commodities.

By taking a long position on a particular asset the manager is asserting that this position is likely to increase in value. When the manager takes a short position in another asset they would be asserting that the asset is likely to decrease in value. Most hedge fund investment strategies aim to secure positive return on investment regardless of overall market performance. Hedge fund managers typically invest their own money in the fund they manage, which serves to align their interests with investors in the fund