What is Hedge Fund?
A hedge fund is a private investment fund that uses a wider range of strategies than traditional funds — including short selling, leverage, and derivatives — to generate absolute returns regardless of market conditions.
Hedge funds can take long and short positions, use leverage, invest across asset classes, and deploy complex derivatives strategies. Their goal is typically absolute returns (positive in both bull and bear markets) rather than benchmark-relative performance.
LPs in hedge funds include institutional investors such as endowments, pension funds, sovereign wealth funds, and family offices. Hedge funds charge performance fees (typically 20% of profits) in addition to management fees, similar to PE structures but on a more frequent cycle.