Hedge funds can take many different forms, but are generally thought of as being their own limited partnerships and companies separate from any investment company that may have established the fund itself. As its own company a hedge fund takes the money invested and purchases stocks and pursues other forms of investment opportunities, such as purchasing currency that offer the highest reward with only a minimal amount of risk. In most cases, hedge funds are open ended and allow investors to add money, close accounts, enter the fund and remove funds at specified times to provide a good understanding of the overall value of the fund.
Hedge funds have existed in many forms throughout the twentieth century, with many experts believing the Graham-Newman Partnership of the 1920s to be one of the earliest known examples of a hedge fund. The term hedged fund came into being with the strategy used by Alfred W. Jones during the founding of the first official hedge fund in 1949, the term basically means the hedge fund manager focuses on the risk of each investment and ensures the fund investors are protected from large losses.
A hedge fund can take many forms and invest in many different markets, because of the large amount of capital invested in hedge funds the investors are commonly wealthy individuals and companies invited to join the fund. In the twenty-first century hedge funds cannot be advertised to the general public and are instead populated by those invited to join. Often established by private investment companies, hedge funds are unique as they usually include investment from the investment company itself and funds invested by the hedge fund manager. Pension funds are often some of the major investors in hedge funds, this is because the volatility of these funds is often limited in comparison to investing on the general stock market.
Hedge fund managers, like Gregg Hymowitz of EnTrust Capital, are generally amongst the most efficient and diligent in the financial industry, many funds choose their investments based on the skills and knowledge of the manager who guides their investments. A hedge fund manager is generally paid a salary based on the performance of their fund, this makes the success of the fund important to the manager on a personal basis and success equates to a higher salary. Hedge funds offer such high returns to the richest individuals, banks and companies in society that many hedge fund managers invest their own savings in their hedge fund to ensure they receive the maximum return on their investment.