hedge fund

noun

Definition of hedge fund

: an investing group usually in the form of a limited partnership that employs speculative techniques in the hope of obtaining large capital gains

Examples of hedge fund in a Sentence

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Last month, AlphaSense, a startup that sells its service to hedge funds and financial analysts, introduced technology that sifts though documents to determine the tenor of their language. — Fortune, "Investors Seek an Edge By Using Technology That Reads Between the Lines," 21 July 2019 For example, low bond yields led the big funds that control trillions in investment to put their money into private equity and hedge funds that paid high rates. — Lydia Depillis, CNN, "10 years later, America's booming economy still bears scars of the Great Recession," 24 June 2019 Banks and private equity funds have been making loans to companies with less than stellar ratings, bundling them into securities and selling them to hedge funds, insurance companies and other players. — Paul Davidson, USA TODAY, "The economic expansion is poised to be the longest ever. Will it die or get a second wind?," 16 June 2019 Several satellite firms offer similar data to a range of clients including farmers, meteorologists and hedge fund managers. — Justin Bachman, latimes.com, "High-flying surveillance balloons deliver sharp images, raise privacy questions," 7 June 2019 New York’s state attorney general polices everything from kosher delis that owe their employees back pay to hedge funds that are ripping off investors. — Chris Smith, The Hive, "“It Won’t Change a Thing In Regard to Mueller”: Why Schneiderman’s Fall Won’t Hurt—And Could Actually Help—The Russia Investigation," 8 May 2018 Think Finance had accused a hedge fund, Victory Park Capital Advisors, of cutting off its access to cash and precipitating bankruptcy filing. — Susan Tompor, Detroit Free Press, "Westland woman had 350% interest rate on $1,200 loan — and a loophole allows it," 12 July 2019 Steyer is the founder of Farallon Capital Management, one of America’s largest hedge funds, the high-risk investment pools for big investors. — Seema Mehta, latimes.com, "Tom Steyer’s bets on private prisons and coal mining could spell trouble in 2020," 11 July 2019 Many activist hedge funds, including Starboard Value LP and Elliott, have struck settlement agreements with companies or aired grievances privately, out of the public eye. — Christopher M. Matthews, WSJ, "Rice Brothers Win Control of EQT," 10 July 2019

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'hedge fund.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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6 Aug 2019

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The first known use of hedge fund was in 1966

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More Definitions for hedge fund

hedge fund

noun

Financial Definition of hedge fund

What It Is

A hedge fund is an investment structure designed to allow management of a private, unregistered portfolio of assets.

How It Works

The original concept of a hedge fund was to offer plays against the market using short selling, futures, and derivatives. Today, hedge funds follow any number of strategies and cannot be considered a homogenous asset class.

Hedge funds (as an asset class) use various strategies, including leverage, hedging, and macroeconomic bets on commodities, currencies, and interest rates. The common denominator of hedge funds is not their investment strategy but their search for absolute returns (as opposed to relative returns). Absolute return strategies focus on generating a positive return on investment (ROI) regardless of the direction of the financial markets.

Hedge fund managers seek freedom to achieve high absolute returns and wish to be rewarded for their performance. The compensation arrangement for the manager typically specifies considerable profit participation. The specific legal organization of hedge funds and the considerable fee structure expected by fund managers are probably the only uniform characteristics of hedge funds.

Only accredited investors are eligible to invest in hedge funds. The term accredited investor includes wealthy individuals and organizations like corporations, endowments, or pension funds. Accredited investors invest in hedge funds because they are looking for investments with negative correlation to the broad market.

Why It Matters

Because they operate outside the realm of the public markets and are lightly regulated, hedge funds have been declared "off limits" to most individual investors. Some say the lack of oversight paired with the high-risk, high-return strategies employed by most hedge funds have resulted in some of the world's most catastrophic financial events, including the failure of Long-Term Capital Management in 1998 and the collapse of two Bear Stearns hedge funds in 2007.

That being said, all investors, regardless of experience and sophistication, need to perform extensive due diligence before investing in any hedge fund. Before investing in a hedge fund, an investor needs to consider the correlation of the fund strategy to the rest of the investor’s portfolio, the reputation and success rate of the fund manager, the use of leverage, as well as the fee schedule.

Source: Investing Answers

hedge fund

noun