Hedge funds

Benjamin Graham Started the First Hedge Fund? Some Claim Just that

Benjamin Graham Started the First Hedge Fund? Some Claim Just that

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.


Saved Articles

The Life and Career of Charlie Munger

Charlie is more than just Warren Buffett’s friend and Berkshire Hathaway’s Vice Chairman – Buffett has actually credited him with redefining how he looks at investing. Now you can learn from Charlie firsthand via this incredible ebook and over a dozen other famous investor studies by signing up below:

  • Learn from the best and forever change your investing perspective
  • One incredible tidbit of knowledge after another in the page-turning masterpiece of a book
  • Discover the secrets to Charlie’s success and how to apply it to your investing
Never Miss A Story!
Subscribe to ValueWalk Newsletter. We respect your privacy.

Congrats! Are you a smart person?

We have an exclusive targeted for being a sophisticated and loyal reader.

Sign up for ValueWalkPremium today and get our exclusive content for 35% off.

Use coupon code vip19 or click on the button below

Limited time offer only ENDS 12/31/2019 or after next 25 subscribers take advantage whichever comes first – please do not share this discount with others