Editing Hedge fund (section)

==History==
During the US [[bull market]] of the 1920s, there were numerous private [[investment vehicle]]s available to wealthy investors. Of that period, the best known today is the Graham-Newman Partnership, founded by [[Benjamin Graham]] and his long-time business partner Jerry Newman.<ref>{{cite web|last=Laughner |first=B. |url=https://www.questia.com/magazine/1P3-3351108591/the-graham-newman-collection |title=The Graham-Newman Collection |archive-url=https://web.archive.org/web/20171117175314/https://www.questia.com/magazine/1P3-3351108591/the-graham-newman-collection |archive-date=17 November 2017 |publisher= |date=Spring 2014}}</ref> This was cited by [[Warren Buffett]] in a 2006 letter to the [[Museum of American Finance]] as an early hedge fund,<ref name="bloomberg.com">{{cite web |first=Chet |last=Currier |url=https://www.bloomberg.com/apps/news?pid=newsarchive&sid=a1UhnH5DkE34 |title=Buffett Says Hedge Funds Are Older Than You Think |publisher=Bloomberg |date=29 September 2006 |access-date=26 November 2011 |url-status=dead |archive-url=https://web.archive.org/web/20131025132323/http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a1UhnH5DkE34 |archive-date=25 October 2013 |df=dmy-all }}</ref> and based on other comments from Buffett, [[Janet Tavakoli]] deems Graham's [[investment firm]] the first hedge fund.<ref name="janet">{{cite book|last1=Tavakoli|first1=Janet|title=Dear Mr. Buffett: What an Investor Learns 1,269 Miles from Wall Street|year=2010|publisher=Wiley|isbn=978-0-470-63242-0}}</ref>

The sociologist [[Alfred Winslow Jones|Alfred W. Jones]] is credited with coining the phrase "''hedged'' fund"<ref name=Ubide>{{cite news |title=Demystifying Hedge Funds |first=Angel |last=Ubide |url=http://www.imf.org/external/pubs/ft/fandd/2006/06/basics.htm |magazine=Finance & Development |publisher=International Monetary Fund |date=June 2006 |access-date=3 March 2011 |archive-url=https://web.archive.org/web/20110628223927/http://www.imf.org/external/pubs/ft/fandd/2006/06/basics.htm |archive-date=28 June 2011 |url-status=live |df=dmy-all }}</ref><ref name=Ineichen>{{cite book |title=Absolute Returns: the risks and opportunities of hedge fund investing |first=Alexander |last=Ineichen |year=2002 |publisher=John Wiley & Sons |isbn=978-0-471-25120-0 |pages=[https://archive.org/details/absolutereturnsr0000inei/page/8 8–21] |url=https://archive.org/details/absolutereturnsr0000inei/page/8 }}</ref> and is credited with creating the first hedge fund structure in 1949.<ref name=Anson>{{cite book |title=The Handbook of Alternative Assets |last=Anson |first=Mark J.P. |year=2006 |publisher=John Wiley & Sons |isbn= 978-0-471-98020-9 |page=36}}</ref> Jones referred to his fund as being "hedged", a term then commonly used on [[Wall Street]] to describe the management of [[investment risk]] due to changes in the [[financial market]]s.<ref name=Lhabitant>{{cite book |title=Handbook of Hedge Funds |last=Lhabitant |first=François-Serge |year=2007 |publisher=John Wiley & Sons |isbn=978-0-470-02663-2 |page=10}}</ref> Jones also developed the popular 2-and-20 structure of hedge funds, in which hedge funds charged investors a management fee of 2% on total assets and a 20% fee on realized gains.<ref>{{cite news |last1=Picker |first1=Leslie |title=Two and twenty is long dead. Hedge fund fees fall further below onetime industry standard |url=https://www.cnbc.com/2021/06/28/two-and-twenty-is-long-dead-hedge-fund-fees-fall-further-below-one-time-industry-standard.html |access-date=29 September 2024 |work=[[CNBC]] |date=28 June 2021 |language=en}}</ref>

In the 1970s, hedge funds specialized in a single strategy with most fund managers following the [[long/short equity]] model. Many hedge funds closed during the [[recession of 1969–1970]] and the [[1973–1974 stock market crash]] due to heavy losses. They received renewed attention in the late 1980s.<ref name=Ineichen/>

[[File:Cumulative hedge fund and other risk asset returns, 1997-2012.png| thumb|350px |Cumulative hedge fund and other risk asset returns (1997–2012)]]
During the 1990s, the number of hedge funds increased significantly with the [[Dot-com bubble|1990s stock market rise]],<ref name="Ubide"/> the aligned-interest compensation structure (''i.e.'', common financial interests), and the promise of above average returns<ref>{{cite book |title=Hedge funds of funds investing: an investor's guide |last=Nicholas |first=Joseph G. |year=2004 |publisher=John Wiley & Sons |isbn=978-1-57660-124-2 |page=11}}</ref> as likely causes. Over the next decade, hedge fund strategies expanded to include credit arbitrage, [[distressed debt]], [[fixed income]], [[quantitative analysis (finance)|quantitative]], and multi-strategy.<ref name=Ineichen/> US [[institutional investor]]s, such as pension and [[Financial endowment|endowment funds]], began allocating greater portions of their [[portfolio (finance)|portfolio]]s to hedge funds.<ref>{{Cite news|url=https://www.bloomberg.com/view/articles/2015-11-09/the-reason-pension-plans-stick-with-hedge-funds|title=The Reason Pension Plans Stick With Hedge Funds|date=2015-11-09|work=Bloomberg.com|access-date=2018-04-09|language=en|archive-url=https://web.archive.org/web/20180410200241/https://www.bloomberg.com/view/articles/2015-11-09/the-reason-pension-plans-stick-with-hedge-funds|archive-date=10 April 2018|url-status=live|df=dmy-all}}</ref><ref>For an example, see [[Ontario Teachers' Pension Plan]], which has more than $150 million in [[Pershing Square Capital Management|Pershing Square]] VI International, L.P., one of [[Bill Ackman|Bill Ackman's]] funds. See full list of major investments here [https://www.otpp.com/investments/performance/major-investments] {{Webarchive|url=https://web.archive.org/web/20180221235747/https://www.otpp.com/investments/performance/major-investments|date=21 February 2018}}</ref>

During the first decade of the 21st century, hedge funds gained popularity worldwide, and, by 2008, the worldwide hedge fund industry held an estimated US$1.93&nbsp;trillion in [[assets under management]] (AUM).<ref>{{cite news |title=Hedge fund industry assets swell to US$1.92 trillion |first=Svea |last=Herbst-Bayliss |url=https://www.reuters.com/article/us-hedgefunds-assets-idUSTRE70I6JY20110119 |work=Reuters |date=19 January 2011 |access-date=22 April 2011 |archive-url=https://web.archive.org/web/20110603114957/http://www.reuters.com/article/2011/01/19/us-hedgefunds-assets-idUSTRE70I6JY20110119 |archive-date=3 June 2011 |url-status=live |df=dmy-all }}</ref><ref>{{cite news|last=Kishan |first=Saijel |url=https://www.bloomberg.com/apps/news?pid=20601087&sid=atrq052in_gE&refer=home |title=Satellite Halts Hedge Fund Withdrawals, Fires 30 After Losses |publisher=Bloomberg |date=27 November 2008 |access-date=14 August 2010}}</ref> However, the [[2008 financial crisis]] caused many hedge funds to restrict investor withdrawals and their popularity and AUM totals declined.<ref name="WSJ">{{cite news |work=[[The Wall Street Journal]] |date=6 December 2010 |title=Hedge-Fund Firms Woo the Little Guy |first=Jaime Levy |last=Pessin}}</ref> AUM totals rebounded and in April 2011 were estimated at almost $2 trillion.<ref name="WSJ 2011">{{cite news |url=https://www.wsj.com/articles/SB10001424052702304887904576399983107988642 |work=[[The Wall Street Journal]] |title=Bridgewater Goes Large |first=Michael |last=Corkery |date=22 June 2011 |url-access=subscription |access-date=12 August 2017 |archive-date=9 July 2017 |archive-url=https://web.archive.org/web/20170709231652/https://www.wsj.com/articles/SB10001424052702304887904576399983107988642 |url-status=live }}</ref><ref>{{cite news |url=https://www.wsj.com/articles/SB10001424052748704204604576269114056530484 |title=Hedge Funds Bounce Back |last1=Strasberg |first1=Jenny |last2=Eder |first2=Steve |date=18 April 2011 |work=[[The Wall Street Journal]] Online |access-date=22 April 2011 |df=dmy-all |url-access=subscription |archive-date=11 June 2015 |archive-url=https://web.archive.org/web/20150611092258/http://www.wsj.com/articles/SB10001424052748704204604576269114056530484 |url-status=live }}</ref> {{as of|2011|2}}, 61% of worldwide investment in hedge funds came from institutional sources.<ref name=Williamson>{{cite web |url=http://www.pionline.com/article/20110210/DAILYREG/110219980 |title=Institutional Share Growing For Hedge Funds |date=10 February 2011 |work=FINalternatives |access-date=10 March 2011 |archive-url=https://web.archive.org/web/20120318085518/http://www.pionline.com/article/20110210/DAILYREG/110219980 |archive-date=18 March 2012 |url-status=live |df=dmy-all }}</ref>

In June 2011, the hedge fund management firms with the greatest AUM were [[Bridgewater Associates]] (US$58.9&nbsp;billion), [[Man Group]] (US$39.2&nbsp;billion), [[Paulson & Co.]] (US$35.1&nbsp;billion), [[Brevan Howard]] (US$31&nbsp;billion), and [[Och-Ziff]] (US$29.4&nbsp;billion).<ref>{{cite web |url=http://www.pionline.com/article/20110919/PRINTSUB/110919925 |title=Updated The biggest hedge funds – Pensions & Investments |publisher=Pionline.com |access-date=14 August 2010 |archive-date=19 October 2011 |archive-url=https://web.archive.org/web/20111019214820/http://www.pionline.com/article/20110919/PRINTSUB/110919925 |url-status=live }}</ref> Bridgewater Associates had $70 billion in assets under management {{as of|2012|03|lc=y}}.<ref>{{cite news |title=Dalio Earns $3.9bn to Top Hedge Fund Pay List |first=Dan |last=McCrum |url=https://www.cnbc.com/2012/03/30/dalio-earns-39bn-to-top-hedge-fund-pay-list.html |newspaper=The Financial Times |date=30 March 2012 |access-date=14 June 2012 |archive-url=https://web.archive.org/web/20130527033012/https://www.cnbc.com/id/46901989/Dalio_Earns_3_9bn_to_Top_Hedge_Fund_Pay_List |archive-date=27 May 2013 |url-status=live |df=dmy-all }}</ref><ref>{{cite news |title=The 40 Highest-Earning Hedge Fund Managers |first=Nathan |last=Vardi |url=https://www.forbes.com/sites/nathanvardi/2012/03/01/the-40-highest-earning-hedge-fund-managers-3/2/ |work=Forbes |date=3 March 2012 |access-date=14 June 2012 |archive-url=https://web.archive.org/web/20120602191743/http://www.forbes.com/sites/nathanvardi/2012/03/01/the-40-highest-earning-hedge-fund-managers-3/2/ |archive-date=2 June 2012 |url-status=live |df=dmy-all }}</ref> At the end of that year, the 241 largest hedge fund firms in the United States collectively held $1.335 trillion.<ref>{{cite news |title=Billion dollar club |first=Amel |last=Robleh |url=http://www.absolutereturn-alpha.com/Article/2988498/Research-and-Rankings-Billion-Dollar-Club/Billion-Dollar-Club.html |work=Absolute Return |date=5 March 2012 |access-date=14 June 2012 |archive-url=https://web.archive.org/web/20120829095258/http://www.absolutereturn-alpha.com/Article/2988498/Research-and-Rankings-Billion-Dollar-Club/Billion-Dollar-Club.html |archive-date=29 August 2012 |url-status=dead |df=dmy-all }}</ref> In April 2012, the hedge fund industry reached a record high of US$2.13 trillion total assets under management.<ref name=Chung>{{cite news |title=Hedge-Fund Assets Rise to Record Level |last=Chung |first=Juliet |url=https://www.wsj.com/articles/SB10001424052702304331204577354043852093400 |newspaper=The Wall Street Journal |date=19 April 2012 |access-date=14 June 2012 |archive-url=https://web.archive.org/web/20150611043844/http://www.wsj.com/articles/SB10001424052702304331204577354043852093400 |archive-date=11 June 2015 |url-status=live |df=dmy-all }}</ref> In the middle of the 2010s, the hedge fund industry experienced a general decline in the "old guard" fund managers. Dan Loeb called it a "hedge fund killing field" due to the classic long/short falling out of favor because of unprecedented easing by [[central bank]]s. The US [[stock market]] correlation became untenable to [[short seller]]s.<ref>{{cite news|url=https://www.ft.com/content/9e7ce258-0c8d-11e6-9456-444ab5211a2f |archive-url=https://ghostarchive.org/archive/20221210/https://www.ft.com/content/9e7ce258-0c8d-11e6-9456-444ab5211a2f |archive-date=10 December 2022 |url-status=live|title=Daniel Loeb warns of hedge fund 'killing field'|website=Financial Times|date=27 April 2016|access-date=26 April 2018 |df=dmy-all |url-access=subscription}}</ref> The hedge fund industry today has reached a state of maturity that is consolidating around the larger, more established firms such as Citadel, Elliot, Millennium, Bridgewater, and others. The rate of new fund start ups is now outpaced by fund closings.<ref>{{cite news| url = https://www.bloomberg.com/news/articles/2019-06-28/hedge-funds-ranks-shrink-again-as-closings-outnumber-launches| title = Hedge Funds' Ranks Shrink Again as Closings Outnumber Launches – Bloomberg| website = [[Bloomberg News]]| date = 28 June 2019| access-date = 16 October 2019| archive-date = 16 November 2020| archive-url = https://web.archive.org/web/20201116082727/https://www.bloomberg.com/news/articles/2019-06-28/hedge-funds-ranks-shrink-again-as-closings-outnumber-launches| url-status = live}}</ref>

In July 2017, hedge funds recorded their eighth consecutive monthly gain in returns with assets under management rising to a record $3.1 trillion.<ref>{{cite news |url=https://www.ft.com/content/798587b0-6d4a-11e7-b9c7-15af748b60d0 |archive-url=https://ghostarchive.org/archive/20221210/https://www.ft.com/content/798587b0-6d4a-11e7-b9c7-15af748b60d0 |archive-date=10 December 2022 |url-status=live |title=Hedge funds regain lustre |work=Financial Times |publisher=ft.com |date=20 July 2017 |access-date=18 September 2017 |df=dmy-all |url-access=subscription}}</ref>