Grown from short roots: What is a hedge fund?
Sunday 06 March 1994
This meant they sold shares they did not own and, if the market prices fell, bought them back at a lower value - to make a profit.
The term 'hedge' was used because the short positions would protect the funds from any fall in the market.
Things have changed, however, and today the label 'hedge fund' is a bit of a misnomer. Michael Steinhardt, one of the pre- eminent US hedge fund managers, says in the book Market Wizards:
'The term now refers to a limited partnership (or an offshore fund) in which the general partner is typically paid on a performance basis, as opposed to more traditional money managers who are paid on assets managed.
'Typically, the manager of a hedge fund has a great deal more flexibility than a traditional money manager, and that is really the key element.'
Investors must typically put at least pounds 100,000 into a hedge fund and can withdraw money only in limited circumstances, to give the managers maximum discretion. Fees are usually 1 per cent of assets and 15 to 25 per cent of profits.
- 1 I was a Woman Against Feminism too
- 2 Is Gideon Levy the most hated man in Israel or just the most heroic?
- 3 Students offered grants if they tweet pro-Israeli propaganda
- 4 The Tory donor whose firm is one of Britain’s biggest tax avoiders - with HMRC's blessing
- 5 John Barrowman praised for Commonwealth Games opening ceremony gay kiss
Vladimir Putin employs a full-time food taster to ensure his meals aren't poisoned
Peaches Geldof: Her final day – and her fatal decision
Students offered grants if they tweet pro-Israeli propaganda
Israel-Gaza conflict: Israel may have committed war crimes, says UN human rights chief
Peaches Geldof inquest: Tragic final days of mother-of-two's life reveal she lied to husband about failed heroin tests
Malaysia Airlines MH17 crash: Vladimir Putin is given 'one last chance' to end hostilities in Ukraine
The 'scroungers’ fight back: The welfare claimants battling to alter stereotypes
The truth about conspiracy theories is that some require considering
Malaysia Airlines MH17 crash: Ukrainian military jet was flying close to passenger plane before it was shot down, says Russian officer
Malaysia Airlines MH17 crash: Massive rise in sale of British arms to Russia
Malaysia Airlines MH17 crash: victims’ bodies bundled in black bags and loaded onto trains
iJobs Money & Business
competitive: Progressive Recruitment: This really is a fantastic chance to joi...
£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...
£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...
Negotiable: Harrington Starr: Market Administrator (1st line Support, Bloomber...