A hedge fund is similar to a mutual fund. It pools money from multiple investors and invests it in securities like stocks and other assets. Unlike mutual funds, though, hedge funds use more aggressive and riskier strategies. They are also very exclusive, which means they are generally only open to accredited investors. Hedge fund maᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚnagers can charge much higher fees than mutual funds because of the increased risks they take and higher returns they promise.

History of Hedge Funds

Former writer and sociologist Alfred Winslow Jones' company, A.W. Jones & Co., launched the world's first 澳洲幸运5官方开奖结果体彩网:hedge fund in 1949. Jones was inspired to try his hand at managing money while writing an article about investment trends earlier that year. He raised $100,000 (including $40,000 of his own money) and tried to minimize the risk of holding long-term stock positions by short-selling other stocks.

This investing innovation is now called the classic 澳洲幸运5官方开奖结果体彩网:long/short equities model. Jones also employed leverage to enhance returns. In 1952, he altered the structure of his investment vehicle, converting it from a general partnership to a limited one and adding a 20% incentive fee as compensation for the managing partner.

Jones was the first money manager to combine 澳洲幸运5官方开奖结果体彩网:short selling, leverage, and shared risk by partnering with other investors. Because of his innovation and use of compensation based on performance, Jones earned his place in investing history as the father of the hedge fund.

Hedge funds took off in the 1990s when high-profile money managers deserted the mutual fund industry for fame and fortune as hedge fund managers. A hedge fund's ability to attract investors tends to rely heavily on the reputation of its manager for delivering results.

Hedge Fund Industry at a Glance

Here are some vital statistics about the hedge fund industry as of the third quarter of 2024:

• The industry had about $4.9 trillion in 澳洲幸运5官方开奖结果体彩网:assets under management (AUM) invested in 54,637 funds.
• There were over 10,000 澳洲幸运5官方开奖结果体彩网:hedge fund managers and almost 8,400 investors.
  
• About 36% of the money in hedge funds comes from private or public pension funds. Other major contributors include endowments and foundations.

Hedge funds charge relatively high fees. A 2% management fee and a 20% "performance fee" are standard. Their investors tend to be some of the very wealthiest individuals. 澳洲幸运5官方开奖结果体彩网:Minimum investments of $100,000 are common, and 🍰some require $1 million 💞or more.

Notable Hedge Funds

Notable hedge funds include Renaissance Technologies (also known as RenTech or RenTec), founded by Jim Simons. Renaissance specializes in systematic trading using 澳洲幸运5官方开奖结果体彩网:quantitative models derived from mathematical and statistical analyses.

Pershing Square is a high-profile activist hedge fund run by Bill Ackman. Ackman invests in companies he feels are undervalued by taking a more active role in the company to unlock value. Activist strategies typically include changing the 澳洲幸运5官方开奖结果体彩网:board of directors, appointing new🥃 management, or pushing for a sale of the com💃pany.

Carl Icahn, a well-known 澳洲幸运5官方开奖结果体彩网:activist investor, leads a prominent hedge fund. One of his holding companies, Icahn Enterprises, is publicly traded and gives investors who can't or don't want to invest directly in a hedge fund an opportunity to bet on Icahn's skill at unlocking value.

Hedge Funds Regulation

Hedge funds face little regulation from the 澳洲幸运5官方开奖结果体彩网:Securཧities and Exchange Commission𓄧 (SEC) compared to other investment vehicles. The SEC only requires hedge funds to register if they have more than $150 million in private funds and manage one or more funds. Funds with AUM of $500 million or more must file quarterly and report the details of their liabilities and assets.

In May 2023, the SEC adopted measures to force large hedge funds to disclose more information via Form PF, which is used for confidential event reporting.

Funds that operate outside the U.S. follow the regulations of their home countries.

The Bottom Line

A hedge fund, like an actively managed mutual fund, is a pool of money from many sources invested by a team of financial professionals. But that's where the similarities end. Hedge funds aren't regulated the same way mutual funds are and operate with far less disclosure. They pursue more flexible and riskier strategies to net big gains for investors and themselves.

But perhaps what sets them apart from mutual funds the most is that they have much higher minimum investment requirements. The majority of hedge fund investors are accredited, meaning they earn very high incomes and have 澳洲幸运5官方开奖结果体彩网:net worths of over $1 million. This is why hedge funds are considered to be a 澳洲幸运5官方开奖结果体彩网:speculative luxury for the rich.