Hedge fund

A hedge fund is a privately managed investment fund that pools money from wealthier individuals and institutions and typically has much more freedom than a mutual fund in how it invests, including the ability to short stocks, use leverage, and trade derivatives. Access is usually restricted to accredited investors.

Hedge funds commonly charge a management fee plus a cut of any profits, historically around two percent of assets and twenty percent of gains, an arrangement often called two and twenty. Despite the flexibility and fees, many hedge funds have underperformed simple low-cost index funds over long periods.