There is no exact definition to the term "hedge fund", it is undefined in federal or state securities laws. There is neither an industry-wide definition nor a universal meaning for "hedge fund" according to the SEC. Since hedge funds do not register with SEC, their actual data cannot be independently followed; therefore hedge fund data is self-reported. There are over 8,500 hedge funds in the U.S. today. Hedge Fund assets are estimated to manage $1 trillion in assets. Estimates of new assets flowing into hedge funds exceed $25 billion on average for the last few years.

The term "hedge fund" is loosely defined and does not always imply a hedging technique is being used. Hedge funds today employ all different types of strategies, and the appropriate description could simply be conveyed as “any unregistered, privately-offered, managed pool of capital for wealthy, financially sophisticated investors.” Hedge funds are usually structured as partnerships, with the general partner being the portfolio manager, making the investment decisions, and the limited partners as the investors. Hedge fund managers attempt to produce targeted returns or absolute performance, regardless of the underlying trends in the financial markets. They implement a wide array of trading strategies, from equity, fixed-income, CTA portfolios, or mathematical algorithms, however they each strive to capture market inefficiencies.