What is a hedge fund?
A hedge fund is a private investment fund that pools money from wealthy individuals and institutions and invests it with few restrictions: it can short stocks, borrow to invest, use derivatives and trade almost anything, in return for higher fees.
Hedge funds are open only to accredited investors and institutions, which lets them avoid the rules that govern mutual funds. Most are set up as limited partnerships: the investors are limited partners, and the manager runs the money for a management fee and a share of the profits.
The name comes from the first one, started by Alfred Winslow Jones in 1949, which bought some stocks and sold others short to "hedge" against the market falling. Many hedge funds today don't hedge much at all; the term now covers any private fund with that kind of freedom and fee structure.
How HedgeFollow uses the term
Loosely. We're less interested in a fund's legal structure than in whether its stock picks are worth following, so our "hedge funds" include private equity and venture firms that file 13Fs, and famous investors like Berkshire Hathaway that aren't technically hedge funds.
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