Hedge Funds Show

8/8/2019 Hedge Funds Show

http://slidepdf.com/reader/full/hedge-funds-show 1/33

HEDGEFUNDS

An Overview

Upendra Badhai (BIF-056)Lakshmi Raghu (BIF-015)



Definition

Private investment pools designed to zig when themarket zags

Investment vehicles that are organized so as toavoid the application of most securities laws



vestopedia defines“An aggressively managed portfolio of investments that uses advanced investment

strategies such as leveraged, long, short andderivative positions in both domestic andinternational markets with the goal of generating high returns”



Alternative

InvestmentsAlternative Asset Class Forecasted DemandedGrowth

Hedge Funds High

Private Equity ModerateVenture Capital, BuyOuts Moderate

ABS/MBS Increasing

Property ModerateEmerging Markets Moderate

Commodities Increasing



Characteristics

Ability to deliver non-market correlatedreturns

Huge variety of hedge fund investmentstyles, many uncorrelated with eachother, provides investors with a wide

choice of hedge fund strategies to meettheir investment objectives

Generally available only to HNIs and



CharacteristicsBroadly defined by their structural characteristics rather than their hedgednature

Benefit by heavily weighting hedge fund managers’ remuneration towardsperformance incentives, thus attracting the best brains in the investmentbusiness. In addition, hedge fund managers usually have their own moneyinvested in their fund

Lock in period for min of 1 year – Little liquid



Take advantage of market inefficiencies

Focus on absolute performance

Great flexibility reg. asset classes, markets,trading styles, and instruments

Infrequent liquidity and redemption dates

High minimum investment level



Minimal governmental regulation

Performance is derived not primarily from the returns of the underlyingmarkets (beta) but predominantly from managers. skill (alpha)

Most funds also have a “high water mark” that is intended to protectinvestors by requiring the manager to offset any losses withsubsequent gains before incentive fees are paid

Some Facts



Hedge fund fees are high---they typically involve a management fee of 1% of assets and an

incentive fee of 20% of profits

Less transparency

Alfred W Jones, the reporter for Fortune Magazine created the first hedge fund in 1949

Some Facts



Risks InvolvedMarket Risk

Strategy Risk

Liquidity Risk

Leverage

Company Risk



SOURCE: Harcourt



Hedge Funds hadoutperformed

securities not only ona return basis but alson risk adjustedperformance basis

SOURCE: Harcourt,

Barclay



Typical structure



Master feeder

structure



Global Top Fund of

Hedge Funds

Source: The Hedge fund journal, 2010



Global Top Hedge Funds(In terms of Growth)

Source: BarclayHedge, Morningstar, Jan2010



US Top Hedge Funds

Organization AUM ($ Billion) RankJP Morgan AM 54 1

Bridgewater Associates 45 2

Paulson & Co 32 3Soros Fund Management 27.5 4

Och-Ziff Capital 24 5

D E Shaw Group 23.6 6




Europe’s Top Hedge

FundsOrganization AUM ($ Billion) Rank

Brevan Howard 31.54 1

Man Investments 24.30 2

Black Rock 21.66 3

BlueCrest Capital 20.50 4

Lansdowne Partners 14.30 5




Asia’s Top Hedge Funds

Organization AUM ($ Billion) Rank

Sparx Group (Tokyo) 4.146 1

Platinum (Sydney) 3.981 2Artradis (Singapore) 2.87 3




Leading Women in

Hedge Funds

ELENAAMBROSIADOU

FOUNDER &CEOIKOS, Cyprus

AUM: $ 1.5Billion

VICTORIAASTON-DUFF

MD, Angelo

GordonEurope,London

AUM: $ 21Billion

TERRI BECKS

PRESIDENT &CEOCampbell &Co,Baltimore

AUM: --

TANYABEDER

FOUNDER,SBCC Group,Newyork

AUM: --

d d S i



Hedge Fund- Strategies1. Emerging Markets

Attractive because of the potential for very high returns. This is due to the overall fast growth of anemerging market compared to that of a more advanced market. Examples include Brazil, China, India, andRussia

Risk involved in emerging markets is much higher due to political instability,less liquidity, and currencyvolatility



2. Short Selling

Selling shares without owning them, hoping tobuy them back at a future date at a lowerprice in the expectation that their price will

drop

The manager borrows securities from a prime

broker and immediately sells them on themarket and later repurchases them

Arbitrage using short sales -example



3. Macro

Aims to profit from changes in globaleconomies, typically brought about by shifts ingovernment policy that impact interest rates,in turn affecting currency, stock, and bondmarkets

4. Aggressive Growth

Primarily equity-based strategy whereby themanager invests in companies, with smaller ormicro cap stocks, characterized by low or nodividends, but expected to experience strong

& rapid growth in EPS or generally high P/E



6. Market Timing

Predicts the short-term movements of variousmarkets (or market segments) and based onthose predictions, moves capital from oneasset class to another in order to capture

market gains and avoid market losses. Themost typical asset classes are mutual fundsand money market funds

Unpredictability of market movements and thedifficulty of timing entry and exit from marketsadd to the volatility of this strategy



7. Special Situations

Invests in event-driven situations such asmergers, hostile takeovers, reorganizations, orleveraged buyouts, bankruptcies, and

liquidations.

Profit from the spread between the current

market value and anticipated value followingthe event.



8. Value

Equity-based strategy whereby the managerinvests in securities perceived to be selling atdeep discounts to their intrinsic or potential

worth

Manager takes long positions in stocks that he

believes are undervalued, can take shortpositions in stocks he believes are overvalued.



9. Funds of Hedge Funds:

Invests in other hedge funds rather thandirectly investing in securities such as stocks,bonds,etc. These underlying hedge funds may

follow a variety of investment strategies

Exhibit lower risk than single-manager hedge

funds.



10. Income

Primary focus on yield or current incomerather than solely on capital gains

11. Market Neutral

Invests similar amounts of capital in securitiesboth long and short, generally in the samesectors of the market, maintaining a portfoliowith low net market exposure

In a Nuts e



In a Nuts e ..

Superior risk-adjusted returns in bear and bull

marketsAccess to some of the best talent in financialmarkets

Highly sophisticated, unbiased investing Transparency and regulation are improving dueto increasing institutionalization

The Future of Hedge Funds..HFs will become mainstream investments:

- institutionalized re ulated and trans arent



THANK YOU

Hedge Funds Show

Documents

Transcript of Hedge Funds Show