DEFINITION of 'Blow Up'

A slang term used to describe the complete and abject failure of an individual, corporation, bank, development project, hedge fund, etc. The term is often used when a hedge fund fails, but is not exclusive to hedge funds.

BREAKING DOWN 'Blow Up'

Hedge funds frequently engage in high-risk investment tactics to try to aggressively accumulate capital gains. Often a hedge fund is so highly leveraged that losses can be catastrophic, and since a hedge fund can have extremely large portfolios, even a small percentage loss can lead to huge cash losses. As funds fail to perform, investors may withdraw, forcing the fund to dissolve or blow up. LTCM was one of the largest funds to blow up in hedge fund history.

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