Evolution of hedge funds, Financial Management

Assignment Help:

Evolution of Hedge Funds:

The establishment of the first Hedge Fund in the United States in the year 1949 by Alfred W. Jones marked the evolution of Hedge Fund industry. It was setup as a general partnership to avoid regulatory tussle from the SEC and later converted into limited partnership. Jones strategy consisted of long and short strategy in order to Hedge market risk, such that it facilitated taking a long position in the undervalued stocks and a short position in the overvalued stocks. Thereby, Jones shifted most of his exposure from market timing to stock picking. In 1966, an article published in the fortune magazine showed the retunes generated by Jones' fund which shocked the whole investment community. The fund significantly outperformed other traditional investment vehicles after paying performance related incentive fee. During the 10-year period from 1955-1965, Jones' Fund returned 670 percent compared to the Dreyfus Fund, which only returned 358 percent and other top mutual Funds. This led to a rush for setting up a large number of Hedge Funds.

Since then, the Hedge Fund industry has gone through many periods of rapid growth (1966-68, late 1980s, and early 1990s) and contraction (1969-70 and 1973-74). Most of the early Hedge Funds perished in the stock market crash of 1969 and early 1970s due to heavy losses as they followed only long strategy in the ageing bull market. Industry slowly recovered from the crash and the popularity of Hedge Funds came into limelight. A review article that published in Institutional Investor listed out impressive returns given by the Julian Robertson's Tiger Fund against Standard and Poor's (S&P) 500. Her investment approach was purely consisted of market directional bets with no hedging policy. The Fund had delivered a compounded return of 43 percent in the first six years of inception compared to the S & P 500's 18.7 percent compounded return for the same period.

 


Related Discussions:- Evolution of hedge funds

How foreign subsidiary’s financial structure become relevant, Under what ci...

Under what circumstances will the foreign subsidiary’s financial structure become relevant? The subsidiary’s own financial structure will become applicable when the parent firm

Monitoring and controlling budgets, Monitoring and Controlling Budgets: ...

Monitoring and Controlling Budgets: The preparation of budgets is only part of the budget cycle.  Once set, an organisation should actively monitor actual revenue and expenditu

Explain speculator - market participants, Explain Speculator - Market Parti...

Explain Speculator - Market Participants A speculator attempts to profit from a modification in the futures price. For doing this, the speculator will take a long or short posi

Characteristics - nature of financial management, Characteristics - Nature ...

Characteristics - Nature of Financial Management: 1) Financial Planning and Control: Finance is a base for all the business activities. Business Activities should be not on

Borrowing funds to purchase bonds, Borrowing Funds to Purchas...

Borrowing Funds to Purchase Bonds There are several sources available to borrow funds. When securities are purchased with borrowed funds then the mo

Cost of capital, what is the major value of the weighted cost of capital ca...

what is the major value of the weighted cost of capital calculation for the firm?

Financial capital, Assume that you have just "run out of money" and are una...

Assume that you have just "run out of money" and are unable to move your "idea" from its development stage to production and the startup stage.  However, you remain convinced that

Two-for-one stock split, The equity accounts for Hexagon International are ...

The equity accounts for Hexagon International are as follows: a.    If Hexagon stock currently sells for $50 per share and a 20% stock dividend is declared, how many new s

Financial management and production department, The production department i...

The production department in any firm is concerned with provision of production facilities, production cycle, skilled and unskilled labor, storage of finished goods, capacity utili

Estimation of working capital, Q. Estimation of Working Capital? A firm...

Q. Estimation of Working Capital? A firm must estimate in advance as to how much net working capital will be required for the smooth operations of the business. Only then, it c

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd