Hedge Fund

A hedge fund is an investment fund which aims to produce absolute returns and whose trading methods include the use of short-selling, program-trading, swaps, arbitrage and derivatives. They usually have high minimum investment requirements, $250,000 and upwards, and require funds deposited with them to be for a minimum period of time to allow trades to achieve their return. Management and performance fees of 1 percent and 20 percent respectively are typical. Hedge fund investors tend to be financial institutions, pensions funds and high net worth individuals. Some hedge funds adopt highly leveraged strategies, purchasing 5 percent of the value of a position, with banks covering the rest.

See also: http://www.hedgefund.net/hfn_public/default.aspx?, Gearing