Courtesy of A.W. Jones Advisers
Alfred Winslow Jones -the face of the first hedge fund.
The founder had little investing experience and had bounced around several careers - diplomacy, sociology and journalism - before settling on investing at age 48.
Alfred Winslow Jones is widely thought to have created the first "hedged fund" in the late 1940s (though some credit legendary value investor Ben Graham).
He got the idea while researching a markets article for Fortune magazine.
Jones' concept was simple: create a "hedge" by shorting stocks he thought would drop in value while going long, and sometimes using leverage, on stocks that he thought would go up. This is a basic hedge fund strategy today but was novel at the time.
To short means to bet that a stock price will drop and using leverage means using borrowed money to boost bets.
His strategy did phenomenally well and made lots of money for his clients. According to a 1966 Fortune article by legendary reporter Carol Loomis, Jones's firm gained 670% in the preceding 10 years, compared with a 358% gain for the leading mutual fund of the period.
Here's more on the then-new strategy from his firm's website:
"Each technique was considered risky and highly speculative, but when properly combined together would result in a conservative portfolio. The realization that one could use speculative techniques to conservative ends was the most important step in forming the hedged fund. Using his knowledge of statistics from his background as a sociologist, Jones developed a measure of market and stock-specific risk to better manage the exposure of his portfolio."
Jones spawned the modern hedge fund industry, which now counts about 11,000 funds worldwide - though many hedge funds today look nothing like Jones'. Today, hedge funds adopt lots of different strategies. Some don't even hedge.
For more on the sprawling history of hedge funds, read Business Insider's explainer.