Source:  richard-wilson.blogspot

A hedge fund is a private investment pool of capital which has few restrictions in what types of assets it can invest in. Hedge funds are often ran by a small team of experienced portfolio managers¸ traders and analysts. Hedge funds earn money by typically charging investors a 2% management fee plus 20% of positive returns past a set point which is often referred to as a hurdle rate. While the hedge funds you often here about in mainstream media are very large with over $10B in assets they represent only .5% of the total universe of well over 12¸000 hedge funds.

Here is a video on what is a hedge fund:

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