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|Hedge Fund Basics|
Hedge Fund Basics
The roots of the modern day hedge fund industry date back to 1949 when a man by the name of Alfred Winslow Jones began employing an investment strategy that offset positions in long equities with short positions in order to better manage risk. This balanced approach now defines today’s hedge fund industry.
Investors in hedge funds must meet basic requirements defined by the Securities and Exchange Commission prior to investing in a hedge fund. Hedge funds are a direct partnership formed between the fund manager and his/her investors. Typically hedge fund managers invest a significant amount of personal capital, aligning their interests with their investors.
In the 1980s, college and university endowments began partnering with funds as a way to help provide scholarships, cutting-edge research and infrastructure upgrades. This institutional partnership expanded in the 1990s and early-2000s to include public and private pensions. Now, philanthropic foundations also partner with hedge funds to help achieve their missions.
From the first fund in 1949, the industry has grown to approximately $3 trillion in global assets under management. Nearly 65 percent of those assets come from institutional investors. So, while many individuals do not invest in hedge funds directly, they benefit indirectly through their pension plans, college scholarships or charitable work.
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