Alfred Winslow Jones (9 September 1900 - 2 June 1989), a sociologist, author, and financial journalist, is credited with forming the first modern hedge fund and is widely regarded as the father of the hedge fund industry.

Background

Jones was born in Melbourne, Australia, the son of Arthur Winslow Jones (an executive of General Electric) and his wife, Elizabeth Huntington. He moved to the United States with his family when he was 4. He graduated from Harvard University in 1923, and, after working as purser on a tramp steamer that sailed around the world, he joined the Foreign Service. In the early 1930s, he became vice consul at the U.S. embassy in Berlin during Hitler's rise to power. In 1932, for a couple of months he was married to Anna Luise Hauser, née Block (1896-1982), a daughter of the painter Joseph Block. In 1936, he married Mary Carter, with whom he travelled through Spain during that country's civil war, reporting on civilian relief for the Quakers. In 1941, he earned a doctorate in sociology at Columbia University.John Russell, Alfred W. Jones, 88, Sociologist And Investment Fund Innovator. NY Times 3 June 3 1989: Section 1, Page 11 He then completed his doctoral thesis, Life, Liberty and Property, a survey of attitudes toward corporate property in Akron, Ohio.

The education of Dr. Jones

During the 1940s Jones worked for Fortune magazine and wrote articles on non-financial subjects such as Atlantic convoys, farm cooperatives, and boys' prep schools. In March 1949, Jones was investigating technical methods of market analysis for an article titled "Fashions in Forecasting", reporting on a new class of stock-market timers and the approaches they employed to call the market. He studied a dozen or so of these "technicians", whose approaches ranged from volume/price ratios to odd-lot statistics to the outcome of the Yale-Harvard football game.

In "Fashions," Jones assessed each approach, sometimes harshly and other times positively. For example, Jones commented on one analysis that "…the market trend succeeded itself 62.5 times out of a hundred and reversed itself 37.5 times. The probability of obtaining such a result in a penny tossing series is infinitesimal." Jones was looking for approaches that offered better than a 'fair game.' He noted that certain approaches require trending markets, others work in higher volatility environments, still others in improving credit markets. He was beginning to feel his way down a dimly lit path toward what today would be considered a factor-based approach to portfolio construction.

Jones's comments on Nicholas Molodovsky's work showed he thought highly of it. In one passage on Molodovsky he said, "Well controlled experimental work of this nature is important and likely to become more accurate as the methods are further developed." He hinted at the approach of risk-weighting individual stocks, as well as quantifying how far a stock has diverged from its fundamental value.