InsiderFlow › Glossary › What is a hedge fund?

What is a hedge fund?

A hedge fund is an investment fund with few rules and many freedoms: it can short, use leverage and derivatives, aiming to profit in any market condition.

Unlike mutual funds, hedge funds are reserved for institutions and wealthy investors. The classic fee structure is "2 and 20": 2% yearly on capital plus 20% of profits. The biggest — Citadel, Millennium, Bridgewater — manage tens of billions.

The name comes from "hedging", but many funds today do the opposite: concentrated, aggressive bets. Results vary wildly: a few multi-decade phenomena, many funds that fold within years.

Concrete example

Jim Simons' Medallion Fund averaged 66% gross annual returns for thirty years: the best track record in history — and it's closed to outside investors.

How you see it in InsiderFlow

With InsiderFlow you follow the big hedge funds' 13F moves — Citadel, Millennium, Pershing Square — explained simply.

Frequently asked questions

Can a retail investor buy into a hedge fund?

Generally no: qualified-investor wealth requirements apply. But their 13Fs are public, and anyone can study them.

Do hedge funds beat the market?

In aggregate no, after fees: the brilliant exceptions are few and nearly impossible to identify in advance.