Hedging primarily means 'eliminating risk'. Hedge funds structure is similar to that of mutual funds. However, the strategies that the hedge fund managers use to hedge the risk at the same time maximise return can be quite risky. Hedge funds are more aggressive than mutual funds as a small number of investors with similar objectives contribute to earning higher returns. The losses can be quite high, similar to profits that these funds promise. Also, there is low or no liquidity, and the investor's money is locked up for a long period.