This paper is an attempt to provide a comprehensive analysis of the benefits and risks of hedge funds. It formalizes a definition incorporating aspects of profit maximization, minimum restrictions, and operational independence.

Introduction: Hedge funds have become a significant component of the global financial system, known for their potential to generate high returns and their complex investment strategies. This research aims to delve into the benefits and risks associated with hedge funds, offering a detailed analysis to inform both investors and policymakers.

Objective: The primary objective of this study is to comprehensively evaluate the advantages and disadvantages of hedge funds. By examining their performance, risk management techniques, and regulatory challenges, we aim to provide a balanced perspective on their role in the financial markets.

Conclusion: The research concludes that while hedge funds offer substantial opportunities for portfolio diversification and high returns, they also pose significant risks, including high volatility and regulatory scrutiny. A nuanced understanding of these factors is crucial for stakeholders to make informed decisions regarding hedge fund investments.