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