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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The property is owned by David Matthews, the father of James Matthews, the hedge fund manager Pippa Middleton married in 2017. — Kayleigh Roberts, Marie Claire, "Kate Middleton's Brother, James Middleton, Is Working as a Tour Guide in Scotland After His Company Lost £3 million," 30 Sep. 2018 The venture capital arm of his family office, Cohen Ventures, recently invested in Autonomous Partners, a crypto hedge fund. — Lucinda Shen, Fortune, "Term Sheet - Friday, July 13," 13 July 2018 The groom, 31, works as an investment analyst at Appaloosa Management, a hedge fund in Short Hills, N.J. — New York Times, "Jayne Bernsten, Jarett Banks," 1 July 2018 The Baupost Group, a hedge fund based in the Back Bay and headed by billionaire Seth Klarman, endorsed the deal. — Jonathan Saltzman, BostonGlobe.com, "Two Mass. biotechs merging to focus on kidney disease drugs," 28 June 2018 Senator Investment Group, a hedge fund, participated in the new round, Lyft said. — Bloomberg, latimes.com, "Lyft valuation hits $15 billion with boost from Fidelity," 27 June 2018 Simultaneously, Lampert serves as chairman and CEO of ESL, a hedge fund that largely focuses on real estate. — Kevin Mccoy, USA TODAY, "Sears shares see-saw on 'numerous' inquiries about partnerships in potential assets deal," 29 May 2018 Born and raised in Pittsburgh, Tepper, 60, is a part owner of the Steelers and founder and president of Appaloosa Management, a global hedge fund based in Miami. — Steve Reed, Houston Chronicle, "Source: Hedge fund manager David Tepper to buy Panthers for record price," 15 May 2018 Last November, Kerrisdale Capital, an activist hedge fund, took a short position in Prothena and issued a public report predicting the failure of NEOD001. — Adam Feuerstein, STAT, "Prothena scraps lead drug following mid-stage study failure," 23 Apr. 2018

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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12 Nov 2018

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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