What is the role of hedge funds in the financial market?

Hedge funds play a significant role in the financial markets as they can act as liquidity providers and help to increase market efficiency. They also provide an important source of capital for companies seeking to raise funds through initial public offerings (IPOs) or other offerings. Hedge funds can also engage in short selling, which can help to identify and correct overvalued assets in the market. Additionally, some hedge funds may engage in activist investing, where they acquire a significant stake in a company and push for changes in management or corporate strategy. However, hedge funds can also contribute to market volatility and risk due to their use of leverage and other aggressive investment strategies.