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

Calculate the cost of capital of organization, The following particulars re...

The following particulars relate to ABC Ltd. at the end of 2008: (i)  Rs. 500,000 equity shares of Rs. 10 each. Present dividend per share is Rs. 15; Market price Rs. 100 per sh

Formulation of optimum credit policy, A firm requires a clear policy regard...

A firm requires a clear policy regarding as to whether the credit should be authorized to a customer and if yes to what extent. Credit principles are set for making such decisions.

Venn diagram, d iscuss the relationship between finance management,economic...

d iscuss the relationship between finance management,economics,accounting, and mathematics. illustrate/show through a venn diagram

#WACC, Filer Manufacturing has 8.9 million shares of common stock outstandi...

Filer Manufacturing has 8.9 million shares of common stock outstanding. The current share price is $59, and the book value per share is $4. Filer Manufacturing also has two bond is

Total revenue change, Write an essay explaining that the quantities of good...

Write an essay explaining that the quantities of goods and services that we can produce are limited by both our available resources and by technology. Assume we want to increase

Collar, Collar A collar can be established by holding a share, along w...

Collar A collar can be established by holding a share, along with purchasing a protective put and writing a covered call, where both options at out-of-money.. For Example

Ledgers, Ledgers: Ledgers record all the entries into the Cash Books. T...

Ledgers: Ledgers record all the entries into the Cash Books. They use the concept of 'double entry' bookkeeping where every ledger entry must be accompanied by another ledger e

Internal rate of return (irr), Internal Rate of Return (IRR) : This rat...

Internal Rate of Return (IRR) : This rate attempts to find the earnings rate, which equates the current value of the streams of earnings to the investment outlay. IRR is descri

Accounting framework - convention of consistency, Accounting Framework  - ...

Accounting Framework  - Convention of Consistency This doctrine denotes that accounting rules, practices & conventions should be continuously observed and applied that implies

Genital and reproductive function, Genital and Reproductive Function: ...

Genital and Reproductive Function: J.Y. is a 43-year-old woman who has detected a lump in the upper outer quadrant of her left breast while performing her monthly self-breast

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