The term "hedge fund" is a misnomer. Hedge funds are not limited to hedging or any particular strategies or markets. As an example, a hedge fund can be both long and short various types of investments. Although these funds have received much attention in the last few years, the first fund actually was developed in 1949. Since then, the number of hedge funds has increased dramatically, with a recent, amazing growth of hedge funds in Europe.

A U.S. hedge fund is usually a private limited partnership with 99 or fewer limited partners. The limited partners' investments are pooled and managed by a general partner (fund manager) that is also an investor. The fund manager may receive a management fee based on assets and/or a performance fee based on appreciation of assets. A typical fee arrangement might be a 1% management fee and a 20% performance fee. Hedge funds vary in degrees of risk and amount of leverage. The traditional customers of hedge funds are high-income individuals, institutions endowments and foundations.




source: CME