1 Answer

Hedge funds are entities that invest on behalf of their sophisticated big clients that are aware of the risks.  Hedge fund entities are less regulated by the government as compared to mutual funds in general. 

Hedge funds typically can go short or/and long the investments and may go to 100% cash if they deem it necessary.  The overriding reason for hedge funds' existence, to me, is that their results do not correlate to the broad market.  In fact, it may even have a negative correlation.  Hence, if the market goes down, a hedge fund could provide a positive returns for its clients due to its shorting of the market as well as their holdings of gold and silver.  This is the why the rich people opt to invest in hedge funds, for their overall portfolio protection.