Hedge Fund Management Glossary

An investment approach targeting positive returns in all market conditions, independent of benchmark performance.

An individual or entity meeting specific financial thresholds required by securities regulators to invest in private offerings including hedge funds.

The excess return of a portfolio relative to its benchmark after adjusting for systematic risk exposure.

The total market value of investments managed by a hedge fund on behalf of its investors.

A measure of a portfolio's sensitivity to market movements, representing systematic or non-diversifiable risk.

The share of profits that fund managers receive as incentive compensation, typically 20% of gains above a hurdle rate.

A strategy that exploits pricing inefficiencies between convertible bonds and the underlying equity by going long the convertible and shorting the stock.

Investing in the debt of companies in or near bankruptcy, seeking to profit from restructuring, recovery, or liquidation outcomes.

The peak-to-trough decline in portfolio value before a new high is achieved, used to measure downside risk.

The comprehensive investigation and analysis process conducted before investing in a hedge fund, covering investment, operational, legal, and risk dimensions.

An investment vehicle that allocates capital across multiple hedge funds to provide diversification, adding an additional layer of fees.

A contractual mechanism limiting the percentage of fund capital that can be redeemed in any given period to prevent forced liquidation.

The managing entity of a hedge fund limited partnership, responsible for investment decisions and bearing unlimited liability.

The sum of all long and short positions as a percentage of fund capital, measuring total market exposure.

A provision requiring a fund to surpass its previous NAV peak before the manager can earn performance fees.

The use of borrowed capital or derivatives to increase the effective size of a portfolio beyond the fund's equity base.

An investor in a hedge fund limited partnership whose liability is limited to the amount of capital contributed.

The additional return investors demand for holding less liquid investments that cannot be easily sold without a significant price impact.

A hedge fund strategy that takes long positions in undervalued stocks and short positions in overvalued stocks to generate alpha.

An annual fee, typically 1.5-2% of AUM, charged by hedge fund managers to cover operating expenses regardless of performance.

The per-share value of a fund calculated as total assets minus total liabilities divided by shares outstanding.

The legal document describing a hedge fund's strategy, risks, terms, fees, and structure, provided to prospective investors.

An investment bank providing hedge funds with securities lending, financing, trade execution, custody, and operational services.

A risk-adjusted performance metric calculated as excess return divided by standard deviation, measuring return per unit of total risk.

A hedge fund approach that uses quantitative models and algorithms to identify trading opportunities with minimal human discretion.