FINM2003 Final: hedge fund
Hedge Funds
Hedge Fund v Mutual Fund
Hedge Fund Mutual Fund
an investment fund that pools
capital from investors, and
invest in alternative strategies
and always trying to
outperform the market, take
advantage of market
opportunity
An investment vehicle made
up of a pool of moneys from
many investors for the
purpose of investing in assets,
and structured and maintained
to match the investment
objectives in its prospectus.
Main role to rebalance
Transparency Limited liability Partnerships
Minimal disclosure of
strategy and portfolio
Composition
Public disclosure of strategy
and portfolio composition
Investors No more than 100
‘sophisticated’ and wealthy
investors
Not limited
Investment Strategies Flexible, act
opportunistically and make a
wide range of investments
Predictable, stable and stated
in prospectus
Shorting Often use shorting, leverage
and options
Limited use
Liquidity Have a lock up period,
require advance redemption
notices
Can be moved more easily
into and out of a fund
Compensation structure Management fee of 1-2% of
assets, and incentive fee of
20% of profits
Fees usually fixed % of
assets, 0.5% to 1.5
Directional, betting one
sector or another will
outperform the other sectors
Non-directional, exploit
temporary misalignments,
buy one type of security and
sell another, strives to be
market neutral
Hedge Fund Styles
Convertible arbitrage Hedged investing in convertible securities, long
convertible bonds and short stock
Dedicated short bias Net short position, in equities, as opposed to
pure short exposure
Emerging markets Exploit market inefficiencies in emerging
market, typically long-only b/c sort-selling is
not feasible in these markets
Equity Market Neutral Uses long/short hedges, typically controls for
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Hedge fund an investment fund that pools capital from investors, and invest in alternative strategies and always trying to outperform the market, take advantage of market opportunity. Flexible, act opportunistically and make a wide range of investments. Have a lock up period, require advance redemption notices. Management fee of 1-2% of assets, and incentive fee of. Directional, betting one sector or another will outperform the other sectors. An investment vehicle made up of a pool of moneys from many investors for the purpose of investing in assets, and structured and maintained to match the investment objectives in its prospectus. Can be moved more easily into and out of a fund. Fees usually fixed % of assets, 0. 5% to 1. 5. Non-directional, exploit temporary misalignments, buy one type of security and sell another, strives to be market neutral. Hedged investing in convertible securities, long convertible bonds and short stock. Net short position, in equities, as opposed to pure short exposure.
