We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.
We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.
Published online by Cambridge University Press: 22 September 2009
This chapter sets out definitions of hedge funds in terms of their legal structure and in terms of the strategies they pursue. It reviews evidence on the number and size of hedge funds, as well as their performance as investment vehicles.
The term ‘hedge fund’ was first coined in 1949 to describe a private investment partnership set up by Alfred Winslow Jones which ‘hedged’ the risk in its operations by buying what it perceived to be undervalued stocks and ‘short selling’ (Box 1) what it perceived to be overvalued stocks, with the combination varying over time as Jones' assessment of market conditions changed.
Box 1: Short-selling
Short-selling is the sale of an asset, such as a bond, equity or foreign currency, that the vendor does not own. The vendor first borrows the asset from another party, with the promise of repaying it back at some future time, and then sells it. If the price of the asset has fallen by the time the vendor is due to repay it to the lender, then he can buy it back in the market for less than he initially sold it. The profit is the selling price less the buying price and the cost of borrowing the asset.
To save this book to your Kindle, first ensure [email protected] is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.
Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.
Find out more about the Kindle Personal Document Service.
To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.
To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.
