Hedge funds don't want to be called hedge funds anymore
Pershing Square, Och-Ziff, Baupost Group, and others have dropped the term "hedge fund" from their public filings and investor notes – or buried it deeply in annual reports, The Wall Street Journal's Rob Copeland noted.
AQR Capital Management, for example, defines its services as "a spectrum of alternative investments." Co-founder David Kabiller said that "labels can create a lot of emotions" and told the Journal his own mom doesn't even like the term.
Other firms are being more upfront about their semantic switch.
“We actually don’t see ourselves as a hedge fund," wrote Baupost founder Seth Klarman in a note to investors. He now refers to the business as a "series of investment partnerships."
The other reason funds might be making the change is to market themselves like more traditional funds – or to avoid being compared with other hedge funds.
It's easy for managers to play with the wording because hedge funds don't fall under one agreed-upon regulatory definition.
For the record, though, here's the SEC's definition:
Like mutual funds, hedge funds pool investors’ money and invest the money in an effort to make a positive return. Hedge funds typically have more flexible investment strategies than mutual funds. Many hedge funds seek to profit in all kinds of markets by using leverage (in other words, borrowing to increase investment exposure as well as risk), short-selling and other speculative investment practices that are not often used by mutual funds.
And yet, according to the Journal, only 1,176 of 8,000 hedge funds actually refer to themselves as such on their websites.