Hedge Fund.

A hedge fund is a lightly regulated pooled investment vehicle available to accredited investors and institutions that employs a wide range of strategies — long/short equity, global macro, event-driven, quantitative — to generate returns regardless of market direction. The classic fee structure is "2 and 20": a 2% annual management fee plus 20% of profits. Hedge funds can use leverage, short selling, and derivatives that are off-limits to mutual funds. Academic research shows most hedge funds underperform a simple index portfolio after fees over the long run, though top-tier managers with genuine edge do exist.