
Alfred Winslow Jones is widely credited with creating the first hedge fund, or more accurately "hedged fund", in the late 1940s.He supposedly got the idea while researching a markets article for Fortune magazine.
The idea was pretty basic-create a hedge, or pairs trade, by shorting stocks he thought would drop in value while buying stocks he thought would head higher. It is called a pairs trade since both the bullish and bearish trade are done simultaneously-or paired together.