Thanks for your response. I have a couple more questions and if you or anybody else can help me then it would be most appreciated.

Let me provide you with more background. The investment I am looking at is an index of the FX hedge fund managers. I can either have 200% exposure or 400% exposure. Historical returns for the 200% exposure are roughly half of the 400% exposure. This I understand as the 400% is a riskier product and therefore losses can also be double.

What I would like to know is by what method am I getting this exposure? Is it through margin, through leverage or notional funding? Is there a difference between the three?

In the marketing document it says - "the improved cash efficiency of the product should not be mixed up with standard leverage. Leverage usually increases the cost of the product since it needs to be bought via the credit facility of a bank" it then goes on to explain that the cash efficiency comes from the fact that the managers chosen only trade exchange traded instruments and do so on margin

How do I get this increased exposure? There must be a cost involved somehow?

I guess what I'm struggling with is how in real terms you get 4x the returns and how this works in practice. I understand that if you place say $100 to this index of four managers and the index returns 10%, your return is $110. What I don't understand is how you get $140 for the 400% exposure products. Does the difference come from whoever is providing the leverage / margin? Do they do this in the hope that you are going to lose money?