What is a hedge fund
A private investment fund for large investors that can use strategies mutual funds cannot: short positions, leverage, derivatives and very concentrated portfolios.
How it differs from a mutual fund
Mutual funds are heavily regulated, disclose holdings often and mostly just buy. Hedge funds are offered to few investors, charge performance fees (the classic “2 and 20”) and are free to bet on declines or concentrate in a few ideas.
Why they can be followed
If they manage over US$ 100 million in US stocks they must file a 13F every quarter. It shows the long side of the portfolio, not shorts or leverage.
Frequently asked questions
Which hedge funds are famous?
Pershing Square (Bill Ackman), Appaloosa (David Tepper), Third Point (Dan Loeb), Baupost (Seth Klarman), Bridgewater (Ray Dalio) and Citadel (Ken Griffin), among others.