Abstract
Economic function of hedge funds is exactly the same as the one performed by investment funds. In both cases managers are in charge of investors’ money. Investors hope that if they withdraw their money, they will recover their contribution and fair return. The first section of the article presents the essence of hedge funds. The second section discusses measures for assessing the effects of investment policy pursued by hedge funds. The third section analyses the investment performance of hedge funds compared to S&P 500 index. The results of the analysis enabled the author to state that hedge funds achieve considerably higher rates of return regardless of market situation.