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

Treasury coupon strips, Observed yield on strips can be used to const...

Observed yield on strips can be used to construct an actual spot rate curve, but it is not free from drawbacks. There are some problems with this; first, the liqu

What can financial institution often do for deficit econmic, What can a fin...

What can a financial institution often do for a deficit economic unit (DEU) that it would have difficulty doing for itself if the DEU were to deal directly with an SEU? SEUs us

Calculate the changes in the margin account, Suppose today's settlement pri...

Suppose today's settlement price on a CME DM futures contract is $0.6080/DM. You comprise a short position in one contract. Your margin account at present has a balance of $1,700.

Explain the post-acquisition effect on eps, Post-acquisition Effect on EPS...

Post-acquisition Effect on EPS If the consideration is completely in shares, one of the effects would be a dilution in EPS suffered by Predator Company. The effect of dilution

Objectives of averaging, The two main objectives are: ...

The two main objectives are: To get at a single value: Measures of central value, by considering the mass of data in one single

Inventory turnover ratio or stock turnover ratio, I need a report on the to...

I need a report on the topic Inventory Turnover Ratio. Can you please assist me for Inventory Turnover Ratio report for about 2500 words?

Explain calculation firm risk of a capital budgeting project, Explain how t...

Explain how to measure the firm risk of a capital budgeting project. The firm risk of a capital budgeting project calculates the impact of adding a new project to the existing pr

Obtain the break even rate, Question 1 (a) These are merely the diffe...

Question 1 (a) These are merely the differences of the two prices. Consequently the mark to market losses are given by { Q 1 - Q 0 ,Q 2 - Q 0 ,Q 3 - Q 0

Case study on labour standars, describe the impact of different types of st...

describe the impact of different types of standards on motivation, and specifically , the likely effects on motivation of adopting the labor standards recommended for geeta & compa

Calculate the waac, Question 1: You hold a diversified portfolio consi...

Question 1: You hold a diversified portfolio consisting of a Rs.5,000 investment in each of 20 different common stocks. The portfolio beta is equal to 1.15. You have decided t

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