hedge fund

Definition

A fund, usually used by wealthy individuals and institutions, which is allowed to use aggressive strategies that are unavailable to mutual funds, including selling short, leverage, program trading, swaps, arbitrage, and derivatives. Hedge funds are exempt from many of the rules and regulations governing other mutual funds, which allows them to accomplish aggressive investing goals. They are restricted by law to no more than 100 investors per fund, and as a result most hedge funds set extremely high minimum investment amounts, ranging anywhere from $250,000 to over $1 million. As with traditional mutual funds, investors in hedge funds pay a management fee; however, hedge funds also collect a percentage of the profits (usually 20%).

Use hedge fund in a sentence

You may want to look at putting some money into a hedge fund if you heard it should have big returns.

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The hedge fund allowed the wealthy investors to side step the law in order to make more money for themselves.

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I set up a hedge fund and immediately went online to read about people's experience with it and how they went about using it.

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