The history of hedge funds can unarguably be traced back to one person - Alfred Winslow Jones. While working on a writing assignment for Fortune Magazine that covered the topic of investing, Jones believed he had a superior strategy of making money both in rising and falling markets. In 1949, he raised $100,000 and started his own fund with a legal and fee structure that is still commonly used today in the hedge fund industry.

His investing approach was simple: buy stock while simultaneously selling short other stocks to protect against downside risk. This act of "hedging" was used to curtail certain risks, and thus the term used to describe funds that incorporated this strategy was a "hedge fund." The returns were then amplified through the conservative use of leverage. Jones was responsible for combining many legal, strategical and risk management techniques that are still used heavily over 50 years later in the hedge fund industry today.

Since Alfred Winslow Jones, hedge fund growth has become a phenomenon with global assets topping 1.5 trillion dollars. The growth of this industry can be attributed to the fact that most hedge funds have greater investment flexibility than regulated investment advisors. It is possible for them to profit from both rising and falling markets, in any investment vehicle, in any part of the world. It is due to these factors that hedge funds are classified as alternative investments, and often included in all traditional portfolios to hedge out certain risks due to the fact that it is non-correlated to traditional equity and fixed income markets.