This is our path becoming alpha masters.

Foremost, an extrodinary investor must comprehend how hedgefund really operates and adapt their unque strategies while implying volatility and leverage in our complicated world of high finance.

The first of these two elements is getting quite well understood. While they may vary in their sector focus and styles, hedge funds share four common and interrelated characteristics:

First, they target positive absolute returns rather than simply outperforming a certain market benchmark or a specific style—thus the common claim that hedge funds like to make that they can deliver strong returns regardless of how global stock markets, commodities, currencies, or bonds do.

Second, they have access to a very wide range of investment tools and instruments. Most important, they can go long or short a market, sector, or company. This leads to the common hedge fund claim that they can change their overall positioning quickly and cost effectively, thus “hedging” their investors’ capital from the vagaries of markets.

Third, they can lever their investment footing to a meaningful multiple of their assets under management. This elasticity underpins hedge fund claims of being incredibly flexible when it comes to “scaling” the investment bet commensurate with the depth of their conviction.

Finally, they almost always follow a fee structure involving a base component and a performance component, traditionally known as “2 and 20” (a 2 percent fee that investors pay irrespective of performance and 20 percent of the profits above a specified threshold—though these days many hedge funds find themselves under tremendous pressure to lower their fees).