A hedge fund is an alternative investment vehicle that pools capital from institutional investors and high-net-worth individuals, then deploys it using a wide range of strategies — long/short equity, global macro, quantitative, arbitrage, and more. The name comes from early funds that "hedged" against market downturns.
Hedge funds are typically only accessible to accredited investors (generally $1M+ in net worth). They charge management fees (commonly 2% of assets) and performance fees (commonly 20% of profits), known as "2 and 20." Top hedge fund managers like Ray Dalio (Bridgewater), Ken Griffin (Citadel), and Jim Simons (Renaissance Technologies) have become billionaires through their funds' success.