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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Rob Carr—Getty Images Legendary Boston hedge fund manager Seth Klarman’s out-of-print investing book, Margin of Safety, popped up in Amazon’s Kindle ebook store last week for $10. — Aaron Pressman, Fortune, "Incredible Deal on Famed Hedge Fund Manager’s E-Book Was Too Good to Be True," 10 July 2018 The group received principal funding from the Action Now Initiative, an advocacy organization founded by hedge fund manager John Arnold and his wife Laura. — NBC News, "Group pledges millions to attack candidates over drug prices," 12 July 2018 Billionaire hedge fund managers suggested that the best way to make wages climb for working people was to cut taxes for the wealthiest. — Peter S. Goodman, New York Times, "Populism Is Waning, Which Is Reason to Party in Davos," 22 Jan. 2018 The lone attendee from his coterie of advisers last year was hedge fund manager Anthony Scaramucci, who later served briefly as Trump’s communications director. — Fortune, "President Trump Will Join the World's Financial Elite in Davos," 9 Jan. 2018 Just over a year ago, Third Point revealed its stake in Nestlé, a sizable chunk of the hedge fund’s overall portfolio. — New York Times, "Activist Investor Daniel Loeb Intensifies Pressure on Nestlé to Reorganize," 1 July 2018 If that happens, Lampert has put the hedge fund in position to snap up some of the company's prime assets, analysts said. — Charisse Jones, USA TODAY, "Sears, Kmart stores ailing as CEO Eddie Lampert's hedge fund gets hundreds of millions," 18 June 2018 The author simply lays out his life, which includes building the largest hedge fund in Russia before tackling the country’s corruption head on. — The Editors, Outside Online, "What We Read, Watched, and Listened to in May," 1 June 2018 Alden is the hedge fund that owns Digital First Media, which operates the Post and is one of America’s largest newspaper chains. — Rob Byers, Time, "Only You Have the Power to Save Your Local News from Corporate Vultures," 14 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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17 Sep 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