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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Clinton married hedge fund executive Marc Mezvinsky in 2010 and has two children already, Charlotte, 4, and Aiden, 2. — Katherine J. Igoe, Marie Claire, "Chelsea Clinton Confirms She's Pregnant With Her Third Child," 23 Jan. 2019 The Ohioan was in the Wharton/corporate law/hedge fund pipeline before becoming a medical marijuana titan. — Amanda Duarte, Town & Country, "An Etiquette Guide for the New Pot Elite," 14 Jan. 2019 These companies sell, use or analyze the data to cater to advertisers, retail outlets and even hedge funds seeking insights into consumer behavior. — Casey Newton, The Verge, "Facebook’s role in the French protests has polarized observers," 11 Dec. 2018 That July, two prominent hedge funds at the investment bank Bear Stearns imploded due to heavy exposure to MBSs and derivatives backed by MBSs, and the bank was purchased in March 2008 by JPMorgan Chase for a bargain-basement price of $2 per share. — Jeff Andrews, Curbed, "10 years after the financial crisis, is the housing market still at risk?," 29 Aug. 2018 In the United States, this scrutiny deepened early last year when HNA announced plans to buy the hedge fund firm owned by Anthony Scaramucci, who was the communications director for the White House at the time. — Alexandra Stevenson, New York Times, "HNA Will Transfer Co-Chairman’s Stake as Ownership Doubts Linger," 13 July 2018 There is further competition from a pair of petitioners who are not participating in the public financing program — hedge fund mogul David Stemerman and Bob Stefanowski, a former UBS Investment Bank chief financial officer. — Neil Vigdor, courant.com, "Steve Obsitnik Weighs Court Action In Public Campaign Financing Standoff," 2 July 2018 Orlando hedge fund Vintage Capital Management has reached a deal to purchase the Rent-A-Center chain for $1.365 billion, the companies announced. — Kyle Arnold, OrlandoSentinel.com, "Orlando hedge fund buying Rent-A-Center chain for $1.365 billion," 19 June 2018 In a filing Thursday in federal bankruptcy court in White Plains, N.Y., lawyers for the committee representing Sears’s unsecured creditors asked Judge Robert Drain for permission to sue Mr. Lampert, his hedge fund ESL Investments and its... — Soma Biswas, WSJ, "Sears Creditors Oppose Sale to Edward Lampert," 17 Jan. 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 Feb 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