General
hedge fund
What does hedge fund mean?
A private pooled investment vehicle for wealthy clients and institutions. Unlike mutual funds, hedge funds can short stocks, use heavy leverage, trade derivatives, and bet on basically anything. The goal is absolute returns (make money whether the market goes up or down), not just beating an index. Fees are famously brutal: the classic '2 and 20' means 2% of assets plus 20% of profits.
"He left Goldman to start his own hedge fund and immediately raised half a billion."
Origin
Coined around Alfred Winslow Jones, who in 1949 set up a fund that 'hedged' long positions by also shorting stocks.
Frequently asked questions
What is a hedge fund?
A hedge fund is a pooled investment fund that uses leverage, shorting, and exotic strategies to chase absolute returns.
How do you use hedge fund in a sentence?
He left his bank job to work at a hedge fund betting against the market.
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