The Basics

The industry began in 1949 as a tool to help investors diversify their portfolios and provide returns that were uncorrelated to the equity market. The industry’s investors must meet basic requirements defined by the Securities and Exchange Commission prior to investing in a hedge fund.

In the 1980s, college and university endowments began partnering with funds as a way to help provide scholarships, cutting-edge research and infrastructure upgrades. This institutional partnership expanded in the 1990s and early-2000s to include public and private pensions. Now, philanthropic foundations also partner with hedge funds to help achieve their missions.

From the first fund in 1949, the industry has grown to approximately $3 trillion in global assets under management. Nearly 65 percent of those assets come from institutional investors. So, while many individuals do not invest in hedge funds directly, they benefit indirectly through their pension plans, college scholarships or charitable work.

This video explains the basic facts about hedge funds and who invests in them. Hedge fund investors must meet basic requirements defined by the Securities and Exchange Commission prior to investing. Investors generally fall into two categories, institutional investors like pension plans, endowments and large philanthropies or high net worth individuals. Nearly two-thirds of all industry investors are institutions, so many individuals who do not invest in hedge funds directly do so indirectly through their pension plans.

A hedge fund is an investment fund that pools capital from a limited number of investors and uses it to purchase a portfolio of assets. Most hedge funds are organized as limited partnerships. This video looks at how these partnerships are structured and the role each partner plays in the fund’s organization.

The first hedge fund was started in 1949 by Alfred Winslow Jones, a sociologist and writer for Fortune Magazine. The industry grew rapidly in the 1990s and now manages approximately $3 trillion globally. This video examines how institutional investors began using hedge funds as tools to help diversify their portfolios, and how that fueled the industry’s growth.

Additional Resources