Hedge Fund
A lightly regulated private fund for wealthy investors, often using leverage and shorting.
What is Hedge Fund?
A private fund, generally limited to accredited investors (for individuals: income over $200,000, or $300,000 joint, in each of the last two years, or net worth over $1 million excluding the primary residence). Uses leverage, short selling, and derivatives. Typically charges a management fee plus a performance fee (the traditional '2 and 20'), and imposes lockups that limit liquidity.
Hedge Fund: a worked example
A fund with a one-year lockup and quarterly redemptions thereafter.
More terms in Equities, Funds & Alternatives
Shareholder Rights (Statutory vs. Cumulative Voting)
Voting, preemptive rights, dividends when declared, inspection, limited liability.
Types of Preferred Stock
Cumulative, convertible, callable, participating, and floating-rate preferred.
American Depositary Receipt (ADR)
A dollar-denominated receipt for foreign shares, traded in the US.
Rights vs. Warrants
Rights: short-term, below market. Warrants: long-term, above market.
Restricted & Control Stock (Rule 144)
Unregistered or insider-held stock with resale limits.
Employee Stock Options (ISO vs. NSO)
Incentive options get capital gains treatment; nonqualified options create income at exercise.
Technical Analysis
Forecasting prices from charts, trends, and trading volume.
Fundamental Analysis
Valuing a company from its financial statements, management, and industry.