October 5th, 2001, 9:48 pm
The noun "hedge" (a row of shrubs used as a boundary) appeared in English in the 12th century from a German root. By the 14th century it was used as an intransitive verb in a literal sense. To hedge was to trim a row of shrubs into a hedge. Surprisingly, there are no early citations for the obvious metaphorical use, to hedge a statement (to cut back on its meaning as in, "I'll love you forever, er, that is, as long as you have lots of money and look great and are nice to me and I don't see anyone better who'll have me.").Because of this lack of early citations, it's an open question whether the word came into finance from that sense, probably through the phrase "hedge a bet" meaning to cut back on the risk of a wager by making an offsetting wager, or from the sense of protection (an investor might hedge against inflation in the same way a farmer might "hedge" in the sense of planting a hedge against wandering cattle or wind damage to crops.The first clear-cut financial use dates only to 1967, in the compound form "hedge fund." While there are plenty of earlier citations, it does not seem to have the precise meaning it does today, just a general sense of protection. In these earlier uses people write things such as "you should save 10 percent of your income as a hedge against losing your job." That just means general protection, not that the value of your savings is inversely correlated to your employment status.