Hedge Funds have grown quickly over the past ten years, and are important part of the financial landscape. They are difficult to define as entities, because the line between what hedge funds do that other institutions do not is blurred – proprietary traders in investment banks, private equity funds, and fund managers all use extensive leverage and derivatives to trade markets or to shift risks. The definition of a hedge fund used here is as follows: lightly-regulated managers of private capital that use an active investment approach to play arbitrage opportunities that arise when mis-pricing of financial instruments.
