Hedge Fund

The first hedge fund was established in the US in 1949, by Alfred Winslow Jones. His objective was to create a fund that offered clients protection, when the market was going down, while achieving high returns over the long run. The hedge fund accelerated in the 1980's and 1990's. In 1990 the global hedge fund industry had already hit 39 billion dollars and by 2003 it hit 800 billion dollars. Alfred Jones had raised $100,000 by himself to start his hedge fund, $40,000 of which was his own money. Now a days, managers of hedge funds charge a management fee of 1-2%, where as Jones, did not charge a fee unless the fund was making a profit. Alfred Jones was a sociologist and a journalist. Alfred used leverage as well as selling short with his funds. Leverage means you borrow money, buy fixed assets or you use derivatives in order to multiply gains and losses. A derivative is where there is an agreement between two parties that specifies conditions about payments that are to be made between the parties.

What is a Hedge Fund?

A hedge fund is a fund that can take both long and short positions, you can buy and sell securities and invest in almost any market at a reduced risk. The primary aim of hedge fund is to reduce risk, while delivering positive returns under all market conditions. There are 14 individual investment strategies used by hedge funds, each offering different levels of risk and return. All hedge funds are not the same. Here is a list of the 14 different styles of hedge funds:

* Aggressive growth. This type of investment means that your equities are likely to experience fast growth of earnings per share.

* Distressed securities. This type of investment means that you can buy equity, trade claims and buy debts at cheap discounts from companies in bankruptcy or companies going into bankruptcy.

* Emerging markets. This type of investment is where you invest in less mature equities.

* Funds of hedge funds

* Income. This type of investment is aimed on current income.

* Macro. You would invest in all major markets, such as bonds, currencies and equities.

* Market neutral-abritrage. This type of investment focuses on returns with low bond and equity markets.

* Market neutral-securities hedging. This type of investment is usually with T-Bills. You would invest in this equally both in the long and short term.

* Market timing

* Opportunities

* Multi strategy

* Short selling. This type of investment is where you sell your investment in short time and you are able to repurchase them in the future at a lower price. There is a