Quant · Core
Hedge Fund
A hedge fund is a lightly constrained private pool that can short, lever, and charge performance fees — a legal wrapper, not a strategy.
Definition
Typically a partnership for qualified investors, with lockups, gates, and a 1-and-15 or 2-and-20 fee. Strategies range from equity LS to GVA to crypto. The word ‘hedge’ is historical; many are just levered directional books.
Why it matters
Prime, borrow, and swap capacity sit here. Drawdowns plus gates are how the wrapper meets a crowd.
Case
A ‘market-neutral’ book that was a factor bet in 2020. The wrapper said hedge; the P&L said momentum short.
How to read it
Strategy, gross/net, liquidity terms, and the true factor exposures. The fee is certain; the hedge is a claim.
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