A lightly regulated investment fund for wealthy investors, free to make aggressive, unconventional bets.
A hedge fund pools money from wealthy individuals and institutions and invests it with far more freedom than a typical mutual fund gets, using leverage, short selling, derivatives, and concentrated bets that ordinary retail funds are usually restricted from making. The tradeoff for that freedom is lighter regulation and, usually, a higher bar for who's allowed to invest in the first place. The name comes from the original idea of "hedging," offsetting risk, though most modern hedge funds are built to actively chase returns rather than simply reduce risk.
Part of the Open Bell Glossary — plain-English explanations of the terms that come up on the show. Browse every term.