How do hedge funds make money?

[Xanthia Alysha]

I know they hedge their bets, which means they use arbitrage?But doesn't that mean their profits and losses will cancel out?

[italkcash]

They dont necessarily hedge their own bets and sort to arbitrage as per say. By hedging they are simply going to save havens such as gold when they are hedging against the market. In other words, they buy up gold, lease it out and buy it back, while speculating that the price of gold has been driven up in the meantime which makes their return higher as the leasing price is fixed according to the time they do the lease of it.