Intro to hedgefund
Belongs to alternative - regulatory comoensation trading
R: accredited standards, like 250000 above, of 1million or more after financial crisis net worth
C: offer them based on how much they earn from client
T: use leverage, so can take long (buy) or short (sell), can do whatever you want with the money
Not fixed classification
Relative value (arbitrage = riskless)
Funds of funds
1st 4 are named single manager funds, underlying investments that do not invest in another hedgefund
last F: invest in a diversified groups of funds
fund mortality – no of hedgefunds that ….
...view middle of the document...
Normal distribution is not a good approximation of hedgefunds.
Hedgefunds never follow normal dist
Positibely skewed – more outliers to the right
Negatively skewed – more outliers to the left
Advantage of using FOF is diversification => spread out the risk
1) Directional strategies
- Have some degree of systematic exposure (systematic risk is non diversifiable risk, always be there, eg. Recession/war)
2) Event risk strategies
- take position of
3) Absolute return strategies
- still earn positive retirns regardless of market
4) Diverisified strategies
- diversifying acorss different investment themes
hedgefunds are opportunistic investments
taking advantage of all possible opportunities , so can use diff strategies,
eg. Undervalued share, buy. Overvalued share, sell.
LONG + SHORT
LONG – buy a share
SHORT – sell a share (eg. Borrow another person’s share to sell in hope that the share price will drop)
1. Adds value to portfolio through specialization
- do what you are good at
2. Fill the gaps in your existing portfolio
- by doing hybrid
Global hedgefunds do not have a contribution to the financial crisis. They make the situation worse but are not the main causes.
Representativeness of hedgefund industry (create a benchmark)
Characteristics of sample to the chracteristics of the entire hedgefund
**usually want to paint a good picture for themselves
Biasness may result from the choosing of sample:
1. survivorship bias
- when you exclude hedgefunds that are already...