A hedge fund is a private investment fund charging a performance fee whose primary objective is to reduce volatility and risk while attempting to preserve capital and deliver positive returns under all market conditions. These funds are usually organized as limited partnerships and typically invest on behalf of sophisticated investors due to the substantial risks involved in unregulated, complex, and leveraged investments. Hedge fund strategies vary enormously -- many funds hedge against downturns in the markets -- especially important in times of high volatility and anticipation of corrections in overheated stock markets. A hedge fund can take both long and short positions, use arbitrage, buy and sell undervalued securities, trade bonds, enter into options, futures, swaps and other derivative contracts and invest in almost any opportunity in any market where it foresees impressive gains at reduced risk.