Ryan Hoadley: The History of the Hedge Fund

The recipient of a bachelor of business administration from the University of Michigan Stephen M. Ross School of Business, Ryan Hoadley has dedicated his career to the financial sector. Currently an analyst at a New York-based hedge fund, Hoadley advises on long and short equity hedge funds in various industries.

The hedge fund traces its history back to the late 1940s. Alfred Jones, a native Australian, studied investment trends while writing for Fortune magazine. Interested in investing, he raised $100,000 and short sold stocks while maintaining long-term stocks. Still applied today, this became known as the classic long/short equities model. With the model’s success, Jones transformed his venture into a limited partnership that utilized short selling, leverage, and shared risk while paying employees based on the performance of their investments. Alfred Jones’ business concept later earned recognition as the first hedge fund.

Although Jones’ ideas were initially unknown to the public, a 1966 article in Fortune magazine brought them attention. Within two years, more than 140 hedge funds emerged and followed the same strategy. However, many of them attempted to apply riskier strategies and failed. Throughout the 1970s, hedge funds remained relatively underground, but a 1986 piece in Institutional Investor highlighting their success led to a massive increase in their presence during the 1990s and 2000s.