hedge fund

hedge fund
hedge fund see fund 2

Merriam-Webster’s Dictionary of Law. . 1996.

hedge fund
n.
A mutual fund or partnership of investors that uses hedging techniques such as arbitrage, futures contracts, and selling short in an attempt to maximize profits.

The Essential Law Dictionary. — Sphinx Publishing, An imprint of Sourcebooks, Inc. . 2008.


hedge fund
USA
Type of private investment fund that charges performance fees. Hedge funds are only open to a limited number of qualified accredited investors, leverage and short selling strategies. The name derives from their strategy to hedge their investments, though not all hedge funds actually do so today.
Hedge funds are similar to private equity funds in that both are lightly regulated, private pools of capital that invest in securities and compensate their managers with a share of the fund's profits. Most hedge funds invest in relatively liquid assets so they can permit their investors to withdraw their money from the fund frequently (often requiring some months notice). Private equity funds invest primarily in very illiquid assets such as newly formed companies and their investors are "locked in" for the entire term of the fund.
Usually the hedge fund manager will receive both a management fee and a performance (or incentive) fee intended to motivate the investment manager to produce the largest returns they can. A typical hedge fund fee is "2 and 20", meaning management fees of 2% and performance fees of 20%.
Hedge funds are typical investors in bank term loans and second lien loans.
Related terms

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

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