| Alfred Winslow Jones started hedge funds in | | | | successfully implement the requirement that |
| 1949. He was a pioneer of non-traditional | | | | hedge funds be registered with the SEC. If this |
| investment strategies. "Non-traditional" categorizes | | | | continues and is successfully implemented, then all |
| hedge funds quite accurately. Hedge funds have | | | | of the advantages to secrecy will be lost. |
| the potential to make an investor quite a bit of | | | | One negative aspect of the non-regulation of |
| money, but many do not understand the nature | | | | hedge funds is the fact that there are no official |
| of hedge funds. Hedge funds have undergone | | | | hedge fund statistics. Most hedge fund holders are |
| skepticism because they do not have to disclose | | | | large companies and so little is knows about their |
| their activities to third parties. | | | | financial movements. Hedge funds are based in |
| Hedge funds can be quite profitable if an investor | | | | offshore jurisdictions, making them seem even |
| uses the best techniques. One technique is risk | | | | more suspicious. Unlike mutual funds that have a |
| arbitrage. Basically, buying stocks in a company | | | | base in large cities like New York, Hedge Funds |
| that is in the process of a merger and acquisition. | | | | are based in places like Bermuda, Cayman Islands, |
| Companies announce a specific price the day of | | | | and the Virgin Islands. It may seem strange to call |
| the merger, so if the stock is under the stated | | | | your fund manager in Bermuda rather than to call |
| value before the day of the merger, it is a | | | | someone in New York City. |
| relatively safe plan to buy and wait. This does | | | | Another negative aspect of hedge funds is their |
| pose some risk, because some mergers do not | | | | high price tag. Hedge funds seem to be more |
| go through. | | | | suited for large businesses and companies that |
| Hedge funds are very secretive and do not have | | | | are merging than they are suited for the average |
| to disclose their activities to third parties. This | | | | worker. Hedge funds usually require an |
| allows hedge funds to be free from the | | | | extravagant amount of money for initial purchase. |
| regulations that mutual funds have to adhere to. | | | | If someone does have the money, however, |
| This can be considered as beneficial because fund | | | | they can gain even more money with this |
| managers will perform better because they see a | | | | sometimes high-risk venture. |
| direct profit from the success of the fund. In | | | | Hedge funds have the potential to help an |
| mutual funds, this is not so. Also, large companies | | | | investor gain quite a bit of money. However, |
| can move undisclosed amounts of money and | | | | hedge funds undergo a great amount of scrutiny |
| gain significantly without authorities noticing. Actual | | | | because of the lack of regulations and the general |
| numbers are not known, but HFR (hfr.com) | | | | secrecy surrounding hedge funds. Hedge funds |
| reported that at the end of the second quarter in | | | | are based offshore and have been rumored to |
| 2003, there were 5660 hedge funds managing | | | | hold as much as $665 billion. Some reports even |
| $665 billion dollars around the world. The sheer | | | | state that at one point, 39 firms were managing |
| magnitude of this number is shocking, but | | | | hedge funds worth $1.1 trillion. These startling |
| demonstrates the massive profits that can be | | | | numbers show that hedge funds can be quite |
| made from successful hedge fund strategy. | | | | lucrative. |
| Unfortunately for secretive businesses that enjoy | | | | Jenny Delinga writes about a variety of financial |
| the secrecy of hedge funds, the U.S. Securities | | | | topics, but prefers to write about hedge funds. |
| and Exchange Commission is attempting to | | | | |