BUS614: International Finance

The history is silent whether it was a cold winter morning or a hot summer evening in late 1940s, when Alfred Winslow Jones, an Australian born and American raised sociologist and publicist, who was working with different social woes (for instance, poverty), hit upon an idea: Why not making money on investments? As a result, he created "A. W. Jones & Со", which is believed to be the first hedge fund ever.

At first, the goal of the fund was to earn enough money for comfortable life without wasting time on "donkey work". Jones managed his own funds along with money of his friends. As a reward, he received 20% of the profit.

Today, Alfred's investment strategy looks quite trivial, because it involved buying value stocks, the price of which might, in his opinion, rise and selling stocks of the companies that he expected to depreciate. This approach allowed to diversify risks and receive decent profit. Apart from this, Jones stated that he created the method of tracking and selecting stocks with a high probability of growth. Despite the fact that initial goals of the fund were pretty moderate, the company's success and investment scheme reshaped the market by mid 1960s and kickstarted the hedge fund industry.

Over the first 10 years of operation, the fund started by Jones raised its investors' capital by 670%, over the next 5 – by another 325%. However, at those times in the USA and some other countries there were serious legal restrictions, which allowed only big institutional investors with 100 million dollars or more to invest in hedge funds. These restrictions forced hedge funds to flee to tax havens, where financial regulation was more tolerant and loyal.

Source: Dmitriy Gurkovskiy, https://blog.roboforex.com/blog/2019/06/14/what-a-hedge-fund-is-and-how-it-works/
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