As the name hints, hedge funds were originally meant to "hedge" risk, offering consistent returns regardless of whether the market goes up or down.
Of course, this turned out to be pretty much impossible in practice, and now the name seems to be applied willy-nilly to anybody who invests large amounts of money in ways that are for some reason or other not available to the average punter. And even that distinction seems to be gone now that funds like ARK are available in handy ETF format to anybody with a Robinhood account.
It’s not impossible in practice at all. It just turns out that when the Fed pumps all risk assets for 15 years, nobody really wants to be hedged (until, of course, they do). Hedge funds are in the game of absolute returns. And it turns out that many investors time horizon for absolute returns is shorter than it should be.
Of course, this turned out to be pretty much impossible in practice, and now the name seems to be applied willy-nilly to anybody who invests large amounts of money in ways that are for some reason or other not available to the average punter. And even that distinction seems to be gone now that funds like ARK are available in handy ETF format to anybody with a Robinhood account.