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OVERVIEW OF THE HEDGE FUND INDUSTRY

Having examined the events surrounding George Soros and Julian Robertson in the first half of 2000, it is now important to look at hedge funds and the hedge fund community in general—characteristics of hedge fund managers, the impetus behind the recent growth of hedge funds, the different strategies traded, recent black eyes suffered in the industry, and recent regulatory initiatives.

MISNOMER

The term "hedge fund" is a misnomer. What are these managers? What are their common traits? In the early days of the first hedge fund, which was run by Alfred Winslow Jones in 1949, the goal was to hedge positions on securities. Today, different styles exist and some managers take larger risks. Hedging exists in varying degrees—sometimes not at all.

Many managers use hedge fund as a term of convenience while admitting it is a misnomer. Other terms used are edge funds, absolute return funds, hybrid products, alternative securities, or private investment partnerships.

Whatever they are called, the goal is absolute returns—to generate