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Hi Anurag,
In answer to your questions about hedge funds:

They exist as the actual "BET" that something that most other people believe is TRUE, is in fact NOT TRUE. Hence they are useful anywhere some members of a group of individuals have opposite expectations, whether that be that the price of Currency/Money (will rise (or fall), or Profits of any industry will rise or fall,etc.

If I am precluded from making a profit from the research/discovery/'working' of my own 'little grey cells', I am not going to waste too much time altruistically warning others of their folly in piling-in to some security. The price may go higher and higher until one day it doesn't, sort of 'the greater fool theory' of markets.
Think tulip bulbs, dot coms.

The concept and implementation of 'Hedging' can get fairly complicated; it probably would be well worth reading an entire book on the subject.

Toni
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