ECON 1 Lecture Notes - Lecture 15: Stock Market Crash, Yield Spread, Autocorrelation
Document Summary
Hedge fund: a private investment pool, open to wealthy or institutional investors, that is largely exempt from sec regulation and therefore can pursue more speculative policies than mutual funds. Transparency: hfs are set up as limited liability partnerships and provide minimal information about portfolio composition and strategy to their investors only. Investors: no more than 100; no advertisement to general public; nowadays: ,000 minimum; traditional: ,000- million investment minimums. Mutual funds lay out their general investment approach (e. g. large, value stocks) and face pressure, when there is a style drift. Hedge funds can take any strategy and may act opportunistically as conditions evolve. Liquidity: hfs have lock up periods, where investors cannot redeem their investments. > allows for investment in illiquid assets with higher returns. Mutual funds have a fixed fee on assets, between 0. 5-1. 5% annualy) Hedge funds charge 1-2% plus a substantial incentive fee, equal to a fraction of any investment profits beyond some benchmark (20%!)
