What Is a Hedge Fund?

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Since 1999 our law firm has recovered more than $350,000,000 for victims of investment fraud and misconduct.
  • Jury Verdict Won Against Prudential Securities $262 Million
  • Recovered for 100-Year Old Widow $30 Million
  • Recovered in Retirement Losses $10 Million
  • Recovered for a Large Group of Individual Investors $6.5 Million
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  • Recovered for Elderly Ponzi Scheme Victim $3.2 Million
  • Recovered for More Than 50 Families of Ponzi Scheme in California $3.2 Million
  • Recovered for 35 Families in Northeast Ohio $3.1 Million
  • Losses Recovered for 20 Retirees $3 Million
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What is a Hedge Fund?

Hedge funds used to be available for only the wealthiest and most sophisticated investors. But no anymore. Today, just about anybody can invest in hedge funds through so-called “fund of funds” (FOF) and other alternative products that are sold by the nation’s largest brokerage firms.

Webster’s Dictionary defines “hedge” as something that provides protection or defense. Many investors purchase hedge funds with that in mind, thinking that they’re protecting or defending their portfolio from bad markets. Unfortunately, that simply is not true. In fact, hedge funds are often incredibly risky, underperform against the market, and not worth the high cost.

Like mutual funds, a hedge fund is an investment pool that is managed with the goal of achieving positive investment returns. Unlike mutual funds, hedge funds typically have more flexible investment strategies, and use risky tactics like leverage, short selling, and other speculative strategies. In doing this, hedge funds often promise that they can achieve better results with less risk than conventional funds that purchase only stocks. Hedge funds regularly use terms like “low volatility” or “low correlation with the market” to sell that promise to investors.

The reality is very different. In terms of performance, studies have shown repeatedly that hedge funds over promise and under deliver. On top of that, they’re incredibly expensive. Hedge funds typically charge annual fees of 2 percent plus 20 percent of profits. With such exorbitant fees, it’s little wonder why hedge funds often perform so poorly. Moreover, not only do hedge funds engage in risky strategies, they’re also exempt from most federal and state securities laws.

Because of that, hedge funds are not required to follow even the most basic disclosure protections that apply to most other investments. This means that investors are kept in the dark about what they’re invested in and how their investments are performing.

In short, unless you have a lot of money and can afford the risk of losing a substantial portion of your investment, don’t invest in hedge funds. In my opinion, they’re risky, perform poorly, and not worth the cost.

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Meyer Wilson has represented over 1,000 individual investors in high-stakes claims across the country, and has recovered over $350 million on their behalves. See what former clients have to say about our team.

  • “I primarily worked with Courtney Werning throughout the process and she was informative and knowledgeable. I trusted and fully recommend Courtney and her team.”

    - S.R.
  • “The communication throughout the process was on par - and they took the time to indulge me with the various questions and opinions.”

    - R.G.
  • “What I truly appreciated was getting a great result for my Mom with limited involvement/stress on her.”

    - S.W.
  • “We went to arbitration with the other respondent and I got to see firsthand the level of professionalism and expertise the Meyer Wilson firm can deliver.”

    - D.V.
  • “Chad would take the time to call and talk with me. His explanations were always clear and concise. I also appreciate all the effort put into the details and statistics required to argue this case.”

    - P.N.
  • “Meyer Wilson was able to produce the results that we felt were obvious and warranted while several other firms and even state offices simply had trouble understanding let alone moving the case forward.”

    - B.K.
  • “My overall experience was positive and I would encourage anyone who even thinks they have been a victim of stockbroker misconduct to call David.”

    - S.T.
  • “Meyer Wilson represented me in a suit brought last year against my brokerage firm, securing a very fair and equitable settlement for me.”

    - R.G., M.D.
  • “Right from the start, you had the passion and desire to win this case for us. I have never worked with an attorney or firm as compassionate as yours. I would highly recommend your firm to anyone.”

    - G.A.
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