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Meaning
•An investment fund open to a limited range of investors that is permitted by regulators toundertake a wider range of investment andtrading activities than other investment fundsand pays a performance fee to its investmentmanager.•Each fund has its own strategy whichdetermines the type of investments and themethods of investment it undertakes.•Hedge funds, as a class, invest in a broadrange of investments including shares, debt andcommodities.
 
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Hurdle rates
•Some managers specify ahurdle rate, signifying thatthey will not charge a performance fee until the fund'sannualized performance exceeds a benchmark rate,such asT-billyield,LIBORor a fixed percentage.[2]This links performance fees to the ability of the manager toprovide a higher return than an alternative, usually lower risk, investment.•With a "soft" hurdle, a performance fee is charged on theentire annualized return if the hurdle rate is cleared. Witha "hard" hurdle, a performance fee is only charged onreturns above the hurdle rate. Prior to the credit crisis of 2008, demand for hedge funds tended to outstrip supply,making hurdle rates relatively rare.
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