What type of investments are hedge funds considered?

Hedge funds are classified as illiquid investments with high minimum purchase requirements due to their structure and operational characteristics. They typically require a substantial investment to participate, often set in the realm of hundreds of thousands to millions of dollars, which restricts access to accredited or high-net-worth individuals. This high minimum investment threshold is indicative of the complexity and exclusivity of hedge fund offerings.

In addition to the monetary requirements, hedge funds often engage in a variety of investment strategies that can include derivatives, leverage, and investments in non-publicly traded securities. These strategies can lead to a lack of liquidity, meaning that investors may face restrictions on withdrawing their funds on short notice, sometimes only being able to withdraw at specific intervals. This differentiates hedge funds from other types of investments that may be more liquid and accessible.

By understanding these characteristics, it becomes clear why hedge funds fit within the category of illiquid investments with high minimum purchase requirements.