Definition
Hedge Fund
A pooled investment fund that employs diverse strategies to generate returns.
A hedge fund is a pooled investment vehicle that uses a range of strategies — long-short equity, macro, arbitrage, derivatives — to generate returns for institutional and high-net-worth investors. Hedge fund managers typically charge a '2 and 20' fee structure: 2% of assets under management annually plus 20% of profits. Many of the world's wealthiest individuals founded or manage hedge funds.
Frequently Asked Questions
What is the difference between a hedge fund and a mutual fund?
Mutual funds are available to retail investors, are typically long-only, and are highly regulated. Hedge funds are available only to accredited/institutional investors, use complex strategies including short-selling and leverage, and face fewer regulatory constraints.