What Is A Hedge Fund?  A Jargon-Free Guide to This Investment Vehicle

If you’re confused about the question “what is a hedge fund?” you are not alone. Part of their allure is their exclusivity and secrecy.

What Is A Hedge Fund?

A hedge fund is a partnership between a professional fund manager and investors (often referred to as limited partners). The manager and investors pool money into a fund, using different strategies to grow the fund.

Hedge Fund Strategies

Hedge funds implementing a global macro strategy look at the big picture economic and political trends worldwide and attempt to capitalize on these large-scale ideas

Global Macro Strategy

Hedge Fund Strategies

A directional strategy hedge fund uses market trends and directional market movements to identify equities or other securities. Often computer modeling is used to do technical trend analysis. 

Directional Strategy

Hedge Fund Strategies

An event-driven hedge fund strategy seeks to identify risks and opportunities in specific events and make trades that pay off if those risks or opportunities are realized. 

Event-Driven Strategy

Hedge Fund Strategies

A relative value strategy will attempt to take advantage of price discrepancies between securities, otherwise known as arbitrage. 

Relative Value (Arbitrage) Strategy

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