What is a hedge fund?

Over the past few months many people have been asking me that question. And it’s a bit hard to describe, it’s similiar to asking 10 people the meaning of life, you’ll end up with 12 different reponses. The current argument is whether “hedge funds” are an actual asset class or a compensation strategy for fund managers. The Securities and Exchange Commission (SEC) makes an attempt at describing these type of investment vehicles, as the following: “Like mutual funds, hedge funds pool investors’ money and invest those funds in financial instruments in an effort to make a positive return. Many hedge funds seek to profit in all kinds of markets by pursuing leveraging and other speculative investment practices that may increase the risk of investment loss. Unlike mutual funds, however, hedge funds are not required to register with the SEC.” Hedge Funds are not something new, they have been around since the early 1950’s. In 1949, Alfred Winslow Jones started an investment partnership that is regarded as the first hedge fund. Many of the ideas that he introduced over fifty years ago remain fundamental to today�s hedge fund industry.
download a primer on hedge funds (pdf, 32 pages, 180k)

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