October 2012
Intermediate to advanced
716 pages
24h 44m
English
Content preview from CAIA Level II: Advanced Core Topics in Alternative Investments, 2nd EditionBecome an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
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36.2 BACKGROUND OF THE LONG/SHORT EQUITY HEDGE FUND
In 1949, Alfred Winslow Jones pioneered the hedge fund industry and the long/short strategy in particular, with the creation of A.W. Jones & Co. However, neither the industry nor the strategy was immediately popularized. This section gives an overview of the rise in popularity of the long/short equity hedge fund strategy.
36.2.1 A Short History of Fundamental Analysis and Long/Short Funds
Benjamin Graham is often referred to as the father of fundamental analysis, and the techniques he pioneered in the 1940s have remained popular over the decades. Value-investing techniques were further popularized by the writings of Graham and David Dodd of the Columbia Business School. Tiger Management Group's Julian Robertson popularized the long/short strategy in hedge funds. His successful implementation of value investing propelled the growth of the long/short hedge fund sector to substantial levels. Some of Robertson's top employees left the company to start their own long/short hedge funds. Some of these former employees (referred to as “Tiger Cubs”) have enjoyed success with their funds, presumably employing strategies similar to those of Tiger, and some of these funds went on to spawn new hedge funds when their employees departed.
It is likely that only a few of the top long/short managers have mastered the implementation of these techniques. Finding truly talented long/short managers is a challenging task. Disentangling alpha from beta ...
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