Hedge funds have become more popular in global financial markets, with over 9,000 funds managing $1,500bn in assets in 2006. Despite their growth, concerns exist about their potential negative impact on financial markets. The debate on whether to regulate hedge funds is ongoing, with advocates arguing for their importance in market stability and opponents highlighting systemic risks. The main goal of the thesis is to provide an overview of the historical development of hedge funds, common investment strategies, and the risks versus benefits they present.