Benjamin Graham Started the First Hedge Fund? Some Claim Just thatVW Staff
The history on hedge funds has always baffled many a historians. This is because there are many theories that abound on how the first fund was started. There are historians who credit Alfred Winslow Jones as the first person to operate a hedge fund, while there are people who give this credit to Benjamin Graham.
However, the truth is that Alfred Winslow coined the term Hedged fund, but did not in reality create the first hedge fund. This credit goes to the Graham- Newman partnership. In the 1920s, during the US bull markets, there were a number of ways though which wealthy people used to invest their money. But the most well known partnership that seemed to invest the best was one that was created by Jerry Newman, and Benjamin Graham. That is why this partnership is credited with creating the first hedge fund.
Nonetheless, Alfred Winslow did create the groundwork to create hedge funds as they are known today. This is because he used leveraged money to invest, rather than use his own cash. He also limited his market risk, and exposure, by making sure that he bought assets that he was certain would increase in value, and then selling those that he was sure would decrease. In fact, this approach worked well for him because he was able to make returns of around 670% in ten years, and he was also able to outperform top mutual funds at the time by over 44%. It was this efficacy in his investment schemes that made Jones a legend in investments.
On the other hand, the fund that Graham managed, back then was one based on a partnership, and it also had a sort of compensation on certain percentages of profits, and it also had a limited number of partners as well as short positions. Therefore, historians credit the Graham partnership as the first one. Warren Buffet also supports this because he worked there at one time, and in recent communications he has asserted that it was the only hedge fund he knew of at the time.
So, hedge funds have been around for quite a while; and since there are traces that the funds existed even in ancient Greece; then, crediting who was responsible for the first hedge fund ever is hard, and nearly impossible. In fact, a number of historians agree that this assessment is true, because it cannot be ascertained when, or who was responsible for the first hedge fund. But what remains true is that hedge funds have gotten popular over time, and due to the returns that some funds get, this may not change any time soon.