Friday, December 09, 2005

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My post below, citing Wikipedia's entry on hedge funds, seems like a great example in defense of Wikipedia, which has been under attack a bit lately (not that some of the points aren't legit). Wikipedia was the first place I looked, and the very first paragraph answered my question, completely and perfectly. Out of curiousity, I checked some other online encyclopedias. Brittanica results were hidden behind a payware wall, but to be honest, based on the free summaries provided, I don't think they would have told me what I wanted to know. Ditto for MSN. The Columbia Encyclopdia, accessed through Bartleby, gave a decent historical definition, but it was very dusty, and did not answer the question I had, either. For topical matters--and that goes for serious things, not just cultural trivia like the canonical example of the heavy-metal umlaut--Wikipedia is hard to beat. 8:12:57 AM    comment []

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As "hedge funds" are more in more in the news, I have been a bit perplexed when I hear things like "a hedge fund might by GMAC". I thought the very name hedge funds indicated their purpose--to use a trading strategy that somehow hedges risk ("hedge" in the sense of "taking compensatory countermeasures"). For instance, a company that had a high exposure to the cost of jet fuel might want to hedge against price increases somehow, perhaps by buying options on an oil company stock (that is my made-up example, probably not a particularly good one). Based on the discussions of hedge funds in the news, it seemed quite clear to me that they weren't limited to hedging. Finally, in a news report last night, I heard that issue explicitly addressed, and confirmed. Which prompted me to do what I should have done in the first place--look it up on the web. Here is what I found in Wikipedia: "The term "hedge fund' dates back to the first such fund founded by Alfred Winslow Jones in 1949. Jones' innovation was to sell short some stocks while buying others, thus some of the market risk was hedged. While most of today's hedge funds still trade stocks both long and short, many do not trade stocks at all and the term hedge fund has come to mean a relatively unregulated investment fund, often a partnership rather than a corporation in form, and characterized by unconventional strategies (i.e., strategies other than investing long only in bonds, equities or money markets)." Perfect! 8:02:28 AM    comment []