||Hedge funds are nowadays playing more and more significant role on financial markets while their investment style and processes are often covered in secrecy. The purpose of this thesis is to unfold certain aspects of hedge funds and describe their investment strategies and risk management. In the introduction we are dealing with the history of industry and differences between traditional and alternative investments. Hedge funds are alternative investment vehicles that operate in very heterogenous environment and first part of the thesis is dedicated to reveal their management processes. The core of this thesis is based on analysis of czech offshore hedge funds where we examine their investment strategies and main characteristics of funds. The thesis tries to identify size of this market and to show differences in strategies and understanding of the risk among czech hedge fund managers. We present also the different fee structure between hedge funds and mutual funds.