What is Hedge Fund?

Answer 1

a flexible investment company for a small number of large investors (usually the minimum investment is $1 million); can use high-risk techniques (not allowed for mutual funds) such as short-selling and heavy leveraging

go here for the detailed version: http://en.wikipedia.org/wiki/Hedge_Fund

Answer 2

The term, "hedge fund", is the used to cover a broad range of investment funds which use more innovative and/or proprietary methods of manging money. Industry insiders prefer the term, "alternative investments", to refer to these types of investment vehicles (structures).

There are as many categories of hedge funds as there are mutual funds. In fact many hedge fund managers got their initial start as mutual fund or other institutional money mangers. What sets hedge fund managers apart is that they are using fairly advanced techniques, many of which have yet to be proven or as yet, not well understood. Consequently, the hedge fund techniques have not received wide acceptance and are oftentimes viewed as "risky".

The original term "hedge fund" was coined by "Alfred Winslow", a money manager who in the 1950's set up a long/short fund. A long/short fund is a fund which has a number of long stock positions (stocks purchased) along with a number of short stock positions (stocks borrowed and sold). The short stock positions were to provide a sort of "hedge" against the stock holdings, hence the term, "hedged fund" or "hedge fund".

Today's hedge funds may have no offsetting (or hedge) at all. The term "alternative investments", a better description of these advanced funds, is the term increasingly used.

Answer 3

Here are some things from the Securities and Exchange Commission website about hedges. It is rather technical in places, but abundantly clear in others. You can get the straight scoop and as much of it as you want. Good luck.

Answer 4

A mutual fund that can sell short stocks.