The modern hedge fund world is diverse. Some hedge funds (defined as private investment pools available to qualified, or "accredited," investors) are similar, by composition, to mutual funds, albeit with more concentrated portfolios. Some invest in everything from stocks to bonds to real estate to gold and other commodities, and many continue using derivative strategies and hedging techniques. Leverage is not uncommon.

These days, many hedge funds invest (and trade) in equities, and it's normal to see a hedge fund or two among the top holders of many small-cap stocks.

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