Which of the following is a characteristic of hedge funds?

Hedge funds are known for their ability to employ complex investment strategies to achieve returns that are not typically correlated with traditional asset classes like stocks and bonds. This flexibility allows them to utilize a variety of techniques, including long and short positions, leverage, derivatives, and arbitrage, among others. By implementing these diverse approaches, hedge funds aim to generate alpha or excess returns, regardless of market conditions.

The reason this characteristic is fundamental to hedge funds is that they are designed to be opportunistic in nature, seeking to profit from various market scenarios. This contrasts with the characteristics of other investment vehicles that may be more restricted in their strategies or investment universe. Hedge funds typically cater to sophisticated investors who understand the risks involved in alternative investment approaches.