Top definition
A type of investment fund with very high fees for investors and a focus on complex financial derivatives. Hedge funds charge around 20% of returns (sometimes a lot more) plus a flat fee of typically 2%.

Originally hedge funds were based on the concept of risk hedging; high-yield investments are always riskier than low-yield ones, so a fund manager could presumably put all the money in one instrument with enormous risk and hope for the best. That is, to put it bluntly, insane. So the manager uses a strategy of hedging risk as cheaply as possible, such as a very elaborate combination of derivatives that rise in value if the main asset declines in value.

Hedge funds are organized to be very exclusive, requiring a very long commitment and limited membership. The managers are much more daring and will take much more aggressive risks than mutual funds.
The largest hedge fund company is JP MorganChase.

During the first decade of the '00's, hedge funds outperformed most other asset classes. But when they melt down, like LTCM in 1997, it can be a huge event.
by Sorry, the good guys lost September 04, 2010
Get the mug
Get a hedge fund mug for your sister Jovana.
(FINANCE) a limited liability partnership (LLP), originally limited to 99 partners, and organized to trade securities under specialized guidelines. The first hedge funds were organized to be a counterparty to the riskiest forms of derivative transactions: writing exotic options or swaps in which the buyer transferred most risks (and potential gains) to the hedge fund, but then offsetting the risk with different derivatives.

The first hedge funds benefited (or thought they benefited) from the Black-Scholes formula used to calculate the value of options; supposedly a hedge fund manager could design an immensely complex portfolio consisting mainly of explosively volatile instruments , whose pieces were supposed to absorb each other's risk.

Hedge funds mainly avoided the consequences of the financial meltdown they helped create, racking up gains through the '00's that far exceeded the rest of the stock market.
The hedge fund used to play a major role in absorbing and structuring the risks associated with hedging risks associated with large portfolios, but they now are sophisticated gambling enterprises.

Hedge funds supply market liquidity for the most exotic of instruments.
by Abu Yahya September 01, 2010
Get the mug
Get a hedge fund mug for your coworker Jerry.
Money set aside for a womans bikini wax job.
"Girl it looks like a jungle down there." "Yeah, I'm gonna have to cash in my hedge fund to get that cleaned up."
by Aint Jamima August 03, 2009
Get the mug
Get a Hedge Fund mug for your cousin Beatrix.
When one sticks a wad of cash into the hairy vagina of a stripper.
"Joe, did you did you go to the strip club last night", "Yeah dawg, set up a few hedge funds if you know what I'm sayin."
by thegingerphalice December 08, 2015
Get the mug
Get a hedge fund mug for your sister-in-law Rihanna.
Not to be confused with grass money, this term refers to a separate financial account that a homeowner maintains to cover the costs of products/services to keep his shrubbery tidy and healthy.
Burglars tend to target properties with tall/dense shrubbery that they can crouch behind and hide, so you should always keep a healthy hedge fund to ensure that your bushes stay trimmed and transparent.
by QuacksO May 07, 2018
Get the mug
Get a hedge fund mug for your boyfriend Callisto.