| Alfred Winslow Jones is being considered the father | | | | Goldman Sachs, Man Group, Renaissance Technology |
| of hedge founds, since he founded the first one in | | | | and until the 2006, Amaranth Advisors also featured |
| 1949, although he had forerunners like Jesse Livermore, | | | | between them. Nicholas Maounis was the founder of |
| Bernard M. Baruch and Benjamin Graham, who | | | | Amaranth Advisors, located in Greenwich, Connecticut. |
| operated characteristics of the modern hedge funds | | | | By 2004-2005 most of the firm's capital was in energy |
| long before him. However, Alfred Winslow Jones was | | | | trading and run by Canadian trader Brian Hunter. As |
| the first one to use short selling, a limited partnership | | | | Amaranth did before they wagered that the natural |
| structure and leverage as well as a 20% incentive fee | | | | gas price would increase, but this time it didn't. The |
| to compensate the managing partner. | | | | price went down from $2.49 to $0.58, an enormous |
| Most hedge funds are situated nowadays offshore, | | | | loss for Amaranth - about $6.5 billion. Since the fund |
| independent of the residence of their manager, | | | | had over $9 billion under management, the losses |
| investors or investments in order to make only the | | | | exceeded 65%. Amaranth failed in keeping the most |
| investor pay taxes, not also the fund. Major offshore | | | | important rule, namely not to wager more than you |
| centers are the Cayman Islands, Dublin, Luxembourg, | | | | can afford losing. Amaranth liquidated its assets, but in |
| British Virgin Islands and the Bermudas. 75% of the | | | | July 2007 Brian Hunter founded a new hedge found, |
| world's hedge funds are estimated to be located in the | | | | called Solegno Capital Advisors, which received |
| Cayman Islands. | | | | attention for suing However Brian Hunter was charged |
| Since hedge funds are open only to qualified investors | | | | on the 25th of July 2007 by the Commodity Futures |
| they are most commonly exempt from regulations of | | | | Trading Commission (CFTC) for attempted |
| the SEC, NASD and other qualified bodies. However | | | | manipulation of the price of natural gas futures and for |
| they have to conduct their business in concordance to | | | | making false statements to the New York Mercantile |
| the offshore bank's regulation. Such rules imply usually | | | | Exchange (NYMEX). |
| the requirement of the fund to be independent of the | | | | Hedge funds operate in many ways and the most |
| fund manager, confidentiality and restrictions on the | | | | common are the following. A global macro technique is |
| availability of funds for retail investors. | | | | to seek assets that are mispriced relative to |
| Hedge funds have a reputation for secrecy, but they | | | | alternatives. Long/short equity is a generic term used |
| do have a great influence on the markets since they | | | | to describe all hedged investments in equities. A shot |
| operate billions of dollars and that's why there have | | | | bias emphasizes that the investment is solely short |
| been several calls for regulations. Annually a list of the | | | | and a equity market neutral makes the balance |
| 10 ten best ranked hedge funds is published in the | | | | between short and long positions. Event driven |
| "Institutional Investor" magazine. Edward Lampert of | | | | opportunities are those specialized in the analysis of a |
| ESL Investments was the top earner of 2004, while | | | | particular kind of event, like distressed securities, also |
| 2005's top earner is disputed. Some believe it was | | | | known as companies that are or may become |
| James Harris Simons and others believe it was T. | | | | bankrupt, Regulation D regarding to distressed |
| Boone Pickens. 2006's top earner was John D. Arnold. | | | | companies issuing securities or Merger Arbitrage |
| Notable hedge funds are BluMont Capital, Citadel | | | | between an acquiring public company and a target |
| Investment Group, Fortress Investment Group, | | | | public company. |