Some can be so-called quants: funds that use complex mathematical analysis in making buy and sell decisions. Hedge funds can specialize in different approaches and strategies.
Jones also used borrowed money (leverage) to try to boost the fund’s returns and established the now-common practice in which managers receive 20% of the investment gains above a minimum threshold.Īmong the most prominent hedge funds in the last few decades are: “The idea behind it was: If you are clever in how you position your portfolio with your main assets and your hedges, you should have a portfolio that makes money whether the market goes up or down,” Ning explains. This became known as the classic long-short hedging model. Jones, who began with $100,000 and combined long-term stock investments with short sales to offset, or hedge, some of the risk of the long-term holdings.
The first hedge fund was started in 1949 by Alfred W. “They’re basically ways for very wealthy people and pools of capital to get wealthier,’’ says Titan analyst Vincent Ning.
#Hedge fund meaning professional#
The pool is managed by a financial professional who invests the money in a variety of securities and financial contracts. A hedge fund is a private pool of money collected from an assortment of wealthy individuals and institutions such as trusts, college endowments, and pension funds.
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