Derivatives funds?

A question from Yahoo! Answers:

Pls tell me about derivatives funds?

These are funds that speculate in derivatives (usually, options and futures, but some dabble in swaps as well). Derivatives funds tend to have high volatility, low correlation with major asset classes (such as stocks and bonds), and are not tax-efficient (profits they make in most cases qualify as short-term capital gains, with all related tax disadvantages).

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