A Legacy of Enduring Values
In 1949 Alfred Winslow Jones and four friends formed an investment partnership—the first hedge fund—with Jones as the Managing Partner.
While Jones was intrigued by technical analysis and market forecasts, he was not convinced that anyone could consistently predict the direction of the market. This led him to think about ways in which a fund could keep its capital fully invested while having a lower exposure to market fluctuations.
His key insight was that a fund manager could combine two techniques: buying stocks with leverage (or margin), and selling short other stocks. These techniques were considered risky and highly speculative, but, when properly combined, they would result in a portfolio balanced between returns and risks.
It is important to note that Jones referred to his fund as a “Hedged Fund” not a “Hedge Fund” because he believed that being hedged was the most important identifying characteristic. While the term “hedge fund” is common today, many of these funds are not actually hedged.
The Fund’s remarkable record during its first twelve years of operations fostered enormous growth in its assets and partners. In 1961 a second fund was created for investors with differing tax requirements. This fund was subsequently merged back into the original fund in 1970 and the name of the partnership was changed to A.W. Jones Company.
The next significant milestone in the fund occurred in 1984 when Jones’ son-in-law, Robert L. Burch, III became a Managing Partner and fully transformed the firm into a fund-of-funds structure with no internal managers. This transformation was not a sudden break, but rather the end result of the fund’s evolution toward a diversified, multi-manager portfolio. As Burch was making his initial allocations to external managers he wisely made the largest allocation to a relatively new hedge fund run by his old friend Julian Robertson. Tiger Management would go on to become one of the largest and most successful hedge funds in the world.
During the 1980s Alfred Jones continued to be available for advice and counsel to the firm until his death in 1989 at age 88. Today the family tradition continues at A.W. Jones. Jones’ grandson, Robert L. Burch, IV, became a General Partner/CIO in 2003 and manages the firm with counsel from his father, who now serves as Senior Partner.
Now in its seventh decade, the Firm has remained focused on achieving superior returns for its clients with the lower market risk inherent in the Jones-Model strategy of hedged investing. A.W. Jones has remained family-controlled since inception and has operated under the same proven investment philosophy throughout its history. Remarkably, the operation that started in 1949 with $100,000 in capital has now spawned an investment sector with thousands of funds managing over $1 trillion.