hedge fund, in finance, a highly speculative, largely unregulated investment device. Originating in the 1950s, the funds "hedge" by offsetting "short" positions (borrowing a security and then selling it at a higher price before repaying the lender) against "long" positions (borrowing money to speculate on undervalued stocks; see hedging; speculation), but not all so-called hedge funds are actively involved in hedging. In general, hedge funds, besides being unregulated, are investment capital funds that are limited to wealthy investors and large institutions, that are structured as partnerships, and that use investment strategies involving higher risks in an attempt to produce greater financial gains. The fees associated with hedge funds are high, and can reduce the returns to levels in line with investments involving lower risks. Aggressive hedge funds work with highly leveraged securities, often purchased with less than 5% of actual investor capital, with banks covering the balance. Macro hedge funds speculate in currencies of various countries; financial analysts and government officials blamed such funds, including George Soros's Quantum fund, for disrupting the economies of Asian and Latin American countries in 1998. Other funds speculate in gold and other volatile commodities, or simultaneously buy and sell a stock or other financial instrument in two different markets to profit on the difference in value in the two markets (a technique called arbitrage). Funds are classified as U.S. or offshore; U.S. hedge funds are private investment partnerships that generally invest in traded securities. Offshore hedge funds (normally not open to U.S. investors) are mutual fund companies.

Hedge funds came to public view in 1998 when Long-Term Capital Management (a U.S. fund) nearly collapsed, requiring a $3.5 billion bailout organized by the Federal Reserve Bank of New York and paid by private banks. The bailout led to a number of U.S. and international investigations into hedge funds and calls for greater regulation and scrutiny. An attempt by the Securities and Exchange Commission in 2004 to require hedge funds to register with it was overturned by the federal courts. In 2006 a another major U.S. hedge fund collapse, that of Amaranth Advisors, cost investors more than $6 billion. By 2007 the assets of such funds were estimated at more than $1 trillion; in February of that year the Bush adminstration and U.S. financial regulators rejected increasing the regulation of the funds and instead recommended that persons, institutions, and banks engage in sound practices before investing in or lending to a hedge fund.

hedge, ornamental or protective barrier composed of shrubs or small trees growing in close rows. The plants may be allowed to grow naturally or may be trimmed to various heights and shapes (see topiary work). In the temperate zone, thorny hedge plants include barberry, Osage orange, buckthorn, and hawthorn. Popular evergreen hedge plants are box, privet, azalea, yew, arborvitae, rhododendron, mountain laurel, and holly. Decorative deciduous shrubs often used are lilac, forsythia, mock orange, spiraea, euonymus, and viburnum. Hedges may also serve in erosion control, e.g., Rosa rugosa planted along highway embankments and the rows of poplars, hemlocks, and other trees planted as shelter belts.

Hedge, Frederic Henry, 1805-90, American Unitarian clergyman and author, b. Cambridge, Mass., educated in Germany and at Harvard. He held several New England pastorates. In 1836 he joined Emerson and others in forming the Transcendental Club. His edition of Prose Writers of Germany (1848) established him as a German scholar. Hedge also wrote for periodicals, edited (1857-61) the Christian Examiner, and wrote Reason in Religion (1865) and many other books. He was professor of ecclesiastical history in the Harvard Divinity School (1857-76) and professor of German at Harvard (1872-81).