A hedge fund is a private, pooled investment vehicle that uses advanced, high-risk strategies—such as leverage, short selling, and derivatives—to generate high returns (alpha) for institutional and accredited investors. Unlike mutual funds, they are largely unregulated and seek positive performance regardless of market conditions.
While there is no concrete definition of a hedge fund, a hedge fund can be simply defined as a private pool of investor money that a manager uses to make investments. Traditionally, the term hedge fund was used to indicate an investment strategy of “hedging” the risks of the broader market.
A UK hedge fund is a pooled investment vehicle for wealthy/institutional investors, using flexible, often aggressive strategies (like shorting, leverage, derivatives) to generate high returns, unlike less regulated mutual funds, with managers earning performance fees and investors facing high minimums and lock-up periods, operating under FCA oversight for managers but less direct fund regulation.
Hedge fund makes money by charging a Management Fee and a Performance Fee. While these fees differ by fund, they typically run 2% and 20% of assets under management. Management Fees: This fee is calculated as a percentage of assets under management.
Citadel's Ken Griffin was the biggest gainer by far, with his fortune swelling by more than $7 billion to an estimated $50.4 billion, widening Griffin's lead over the rest of the pack.
Hedge Funds Explained in 2 Minutes in Basic English
Why can only rich people invest in hedge funds?
First off, long/short strategies are VERY expensive to run long term. Secondly, there is a significantly higher risk of a hedge fund going bust than a mutual fund or ETF going bust, so they can afford to take on higher risk.
HFR categorizes hedge funds into seven strategy types: equity hedge; event-driven; fund of funds; macro; relative value; risk parity; and blockchain (relatively new category comprised of cryptocurrency and infrastructure sub-strategies).
Minimum investments may range from $100,000 to several million dollars, compared with a typical mutual fund minimum of $1,000 to $2,500. Let's look at how to invest in a hedge fund. A financial advisor can guide you on the suitability of a hedge fund for your portfolio, as well as the risk and complexities involved.
The 130-30 strategy uses financial leverage by shorting poor-performing stocks to buy shares expected to yield high returns. Investors typically allocate 130% of starting capital to long positions and gain 30% from shorting stocks. This strategy mimics indices like the S&P 500 to optimize stock selection.
Hedge funds seem to rake in billions of dollars a year for their professional investment acumen and portfolio management across a range of strategies. Hedge funds make money as part of a fee structure paid by fund investors based on assets under management (AUM).
Investing $100 a month for 10 years, with a historical average return of 7-10% in broad market index funds, could grow your total to roughly $18,000 to $20,000, demonstrating significant wealth building through consistent investing and compound interest, even starting small. Key steps involve using tax-advantaged accounts (like an ISA or 401(k) if available), choosing diversified options like index funds or ETFs, and focusing on long-term consistency to ride out market volatility.
He went long on stocks that he considered "undervalued" and short on those that were "overvalued." The fund was considered "hedged" to the extent the portfolio was split between stocks that would gain if the market went up, and short positions that would benefit if the market went down. Thus the term "hedge funds."
The "Buffett Rule 70/30" isn't one single rule but refers to different concepts: it can mean investing 70% in stocks and 30% in "workouts" (special situations like mergers) as he did in 1957, or it's a popular guideline for personal finance to save 70% and spend 30% for rapid wealth building. It's also confused with the general guideline of 100 minus your age for stock/bond allocation (e.g., 70% stocks if 30 years old).
Analyzing some similar jobs related to the Hedge Fund job category, we found that Hedge Fund Quantitative Analyst jobs have average salaries greater than Hedge Fund jobs. Significantly, Hedge Fund Quantitative Analyst jobs pay $27,093 (25.4%) more than the average Hedge Fund salary of $106,784.
Who is the British billionaire hedge fund manager?
Chris Hohn. Sir Christopher Anthony Hohn KCMG (born October 1966) is a British billionaire hedge fund manager. As of 2025, he is worth $11.2 billion. In 2003, Hohn established The Children's Investment Fund Management (TCI), a value-based hedge fund.
Starting a hedge fund can be complex and costly. In addition to navigating legal and regulatory hurdles, you'll need to secure substantial capital, ideally starting at $5 million, to establish a credible assets under management (AUM) base.
“The bottom line: When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients,” Buffett wrote to shareholders.
A 2019 study by Harvard Business Review found either Vanguard, BlackRock or State Street is the largest listed owner of 88% of S&P 500 companies. There is a perception that a few select companies own a vast majority of the stock market.
The Medallion fund is considered to be one of the most successful hedge funds ever. From 1994 through mid-2014, it averaged a 71.8% annual return, before fees. The fund has been closed to outside investors since 1993 and is available only to current and past employees and their families.
Many hedge fund employers require employees to receive a bachelor's degree in finance or a related specialty like accounting or economics. Some hiring managers may require a master's in business administration as well.
