A birthday for one of Hedgistan’s founding fathers
Sep 15th, 2009 | Filed under: Hedge Fund Industry Trends, Today's PostBy: Ranjan Bhaduri, AllAboutAlpha.com Editorial Board and Bijan Warner, AlphaMetrix Alternative Investment Advisors
Last week marks the 109th birthday of the “father” of hedge funds, Alfred Winslow Jones (9/9/1900 – 6/2/1989). Much has been written about Jones and the fund he founded with $100,000 in 1949 (including AllAboutAlpha posts here, here, and here), but the relationship between his fund and the contemporary hedge fund landscape is not always clear. While his entrepreneurial spirit and market insight remain central to successful alternative investment, his implementation of investment strategy, fees, and liquidity constraints are not. The current landscape is shaped more by market forces than by the legacy of the particulars of Jones’ first fund.
Who was Alfred Jones, and how did he come up with his particular investing strategy? Jones was unique in how little he resembled many of today’s investment professionals, particularly quants with backgrounds in physics and math. This is not to say that he was math-averse, but his strength was in the study of people, rather than the purely abstract study of numbers. In 1935, and at the height of the Depression, Jones entered graduate school at Columbia where he studied under famed sociologist Robert Lynd. His dissertation research was on attitudes toward property and human rights in Akron, Ohio, a town facing an unprecedented slump, mass unemployment, and labor disputes following the collapse of the local rubber industry. These were the early days of opinion research, and the most complex statistical techniques Jones used in his dissertation were cross tabulations with chi-square tests. The real strength of his study was not in pioneering new statistical techniques, but in making sense of a complex situation using painstakingly gathered empirical data (Jones interviewed 1,700 residents of Akron, with the assistance of interviewers funded by the New Deal-era Works Progress Administration), researching the history of the town, and exploring the interactions between economic, social, and political factors. More…
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