Recently, news is coming that hedge funds are coming to India.
What are hedge funds?
It is similar to a hedge funds, but unlike mutual funds, they take both short and long postions in equity so that beta is close to zero. (Say buy Reliance and sell Mahindra). Now if reliance goes up by 10% and m&m/market goes up by 7%, then overall they make 3%. (they try to reduce market risk, but bank on stock specific returns). But a mutual fund would have made 10% if it invested in reliance alone but would have significantly higher risk. Another difference is that they also leverage ( take say 10millon from investors and 5 million debt) and get more as the capital would be more.

But a mutual fund also i suppose hedges via a different strategy. Say going for say put options on the sensex and a bet on a specific stock. Isnt it? (Or is it only the stocks). Or probably, since hedge funds are more international, it doesn't have so much pressure to outperform??? Also, recently i read that fund of funds is also getting popular in the US. (A fund of funds is nothing but a fund/portfolio of hedge funds!!!).