ABSTRACT
The term “hedge fund” has been variously defined, but, in essence, it is an “investment company” with some characteristics of a mutual fund, in which investor funds are collectively invested by an investment adviser or “manager.” Hedge funds generally trace their history back to A.W. Jones, an entity created by Alfred Winslow Jones, William P. Osterberg, and James B. Thomson in 1949. Hedge fund shares usually have no secondary market, although a few hedge funds have gone public. A distinctive feature of hedge funds is their management structure. Mutual funds must comply with detailed requirements of the Securities and Exchange Commission for independent directors on their boards, and shareholders must explicitly approve certain actions. A hallmark of many hedge funds is the complexity of their trading strategies. Hedge fund trading strategies include directional trading, relative value trading, carry trades, and volatility trading. Directional trading involves forecasting future price movements in a particular asset.
