South African Hedge Funds are classified as Collective Investment Schemes and are regulated by the Financial Services Conduct Authority. Hedge funds aim to deliver absolute returns despite what happens in the market. This means that they aim to deliver a profitable return regardless of the overall market conditions.
In order to participate in the upside (a rising market) whilst limiting the downside (a falling market) hedge funds employ various strategies that traditional long only funds do not. These include the use derivatives and investment strategies such as leveraging and short selling to achieve uncorrelated returns and to unlock diversification opportunities.
Download: What is a Hedge Fund – English