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Hedge funds _HedgeFund_


									Hedge funds (HedgeFund)
The origin and development of hedge funds
Hedge funds (also known as hedge funds) which means "crossed the risk
of the fund," originated in the early 50s the United States. Dang
Shi's action aims to use futures, options and other financial derivative
products and the different stocks of relevant conduct joint air sell real Mai, Fengxian
hedge operating skills in a certain extent Guibi and Reducing Investment Risk. Born
in 1949, the world's first system of limited cooperation Jones hedge funds.
Although hedge funds have emerged in the 20th century 50's, but it in the
next three years does not give too much attention until the 80s of last century, with the
development of financial liberalization, hedge funds have a more vast investment
opportunities, entered a rapid development stage. 90 years of the 20th century, the
world gradually reduce the threat of inflation, while more mature and diverse
financial instruments, hedge funds entered the stage of vigorous development.
According to the British "Economist" of statistics, from 1990 to
2000, more than 3,000 new hedge funds emerged in the United States and the United
Kingdom. In 2002, the hedge fund's profits declined, but the hedge fund
scale is still not small, according to the British "Financial Times"
October 22, 2005 reported so far, total assets in global hedge funds have Dadao 1.1
In a most basic hedging operations. Fund managers buy a stock after the purchase of
such shares at the same time a certain price and time of the put option (Put Option).
The effectiveness of a put option when the stock price is below the option price limit,
the seller the option holder can be hand held stock option limit price to sell, so the
stock by hedge the risk of falling prices. In another type of hedging, the fund
managers first select a particular type of bullish trades, buying the industry favored
few quality stocks, and sell a certain percentage of poor in the industry a few bad
stocks. A result of this combination, such as the industry expected good performance,
quality stocks will rise more than other stocks in the same industry, buying quality
stocks and short bad earnings will be greater than the losses arising from shares; If the
expected error, this stock does not trade up anti-down, then the company's
stock decline will be less than good stock. Then profits will be higher than short
Handicap buy quality stocks fall damage. Because of this operation means, the early
hedge fund can be said is based on a conservative investment strategy hedge hedge
fund management forms.
The characteristics of hedge funds
After decades of evolution, the hedge fund has lost its original connotation of risk
hedge, Hedge Fund of the title is worthy of the name. Hedge funds have become a
synonym for a new investment model. Investment theory is based on the latest and
highly sophisticated financial market operations skills, full use of the leverage effect
of financial derivatives, responsible for high risk. Pursuit of high returns of
investment. Hedge funds now have the following characteristics:
(1) the complexity of investment activities.
Structure in recent years become increasingly complex, ever-changing forms of
various financial derivatives such as futures, options, swaps and other hedge funds
gradually become the main operational tools. These derivative products to hedge risk
in this design, but because of its low cost. High-risk, high-return characteristics of
hedge funds for many modern powerful tool for speculation. Hedge funds will be
accompanied by such a complex combination of financial instruments set up even,
according to market forecast to invest the time in forecasting accuracy for excess
profits, or the use of short-term fluctuations in midfield created the design of
non-equilibrium investment strategies, the market returned to normal state for the
(2) the investment effect of high leverage.
The typical hedge funds often use bank credit to high leverage loans (Leveradge) in
its original fund based on the amount of times or even several times to expand their
investment funds to achieve the maximum reward for the purpose. Hedge fund assets
in securities of high liquidity, hedge funds can easily fund mortgage assets. A capital
of only 1 billion hedge fund, you can repeatedly pledged its securities assets, lending
billions of dollars. The existence of such hit shot effect, making the transaction in a
loan interest deduction, net profit is far greater than using only 100 million U.S.
dollars in capital gains from the operation possible. Similarly, just because of leverage,
hedge funds are not in operation over time is often also face significant risks of loss.
(3) financing of private nature.
The organizational structure of hedge funds are generally co-partnership. Fund
investors to fund the occupation, provide most of the funds but does not participate in
investment activities; fund managers to capital and skills occupation, is responsible
for the Fund's investment decisions. As the operational requirements of
hedge funds and flexibility of a high degree of concealment, so hedge funds in the
United States a partner in the general control of up to 100, and each
partner's capital contribution of 100 million U.S. dollars. Because hedge
funds are mostly private properties, thereby circumventing U.S. law on the public
offering fund the stringent requirements of disclosure. Because hedge funds and
complex high-risk investment mechanism, many Western countries have banned the
recruitment of funds available to the public to protect the interests of ordinary
investors. In order to avoid high taxes and the U.S. De U.S. Securities and Exchange
Commission regulation, Zai U.S. market, hedge funds operate in the Bahamas He
Bermuda Deng Yi Ban Yi Xie taxes low, Guan Zhi Zhu Ce offshore and loose
regional and limited to the outside of the United States investors to raise capital.
(4) covert operations and flexibility.
Hedge funds and ordinary investors for the securities investment funds not only
investors in the fund, fund raising methods, subject to regulatory disclosure
requirements and there is a big difference in degree. Investment activities in the
fairness and flexibility, there are also many differences. Securities investment funds
are generally more precise definition of the portfolio. That is the choice of investment
vehicles and have determined the proportion of programs, such as balanced funds that
the fund portfolio of stocks and bonds generally half and half, growth-oriented funds
that focus on stocks with high growth of investment: while mutual funds may not use
credit funds for investment, and hedge funds are no such limitations and define all the
operational availability of financial instruments and combinations, to maximize the
use of credit funds in order to obtain profits higher than the average market excess
return. As the operational flexibility and a high degree of concealment and the effect
of leverage financing, hedge funds in the modern speculation in international financial
markets play an important role.
The operation of hedge funds
The initial hedging operations, fund managers bought a stock after the purchase of
such shares at the same time a certain price and time of the put option (Put Option).
The effectiveness of a put option when the stock price is below the option price limit,
the seller the option holder can be hand held stock option limit price to sell, so the
stock by hedge the risk of falling prices. In another type of hedging, the fund
managers first select a particular type of bullish trades, buying a few quality stocks in
the industry, while a certain percentage of sold shares in the industry a few poor
quality. A result of this combination, such as the industry expected good performance,
quality stocks will rise more than other stocks in the same industry, buying quality
stocks and short bad earnings will be greater than the loss of stock; If the expected
error, the stock is not up against the industry or, if less than the company's
stock will decline in quality stocks, the profits will be higher than short Handicap buy
quality stocks fall damage. Because of this operation means hedge funds are used for
the early preservation of conservative investment strategy hedge fund management
forms. However, as time goes by, people on the financial derivatives gradually
deepening understanding of the role, the acclaimed hedge funds in recent years is due
to the ability of hedge fund money in a bear market. From 1999 to 2002, the average
annual loss of general public funds 11.7%, while hedge funds in the annual profit of
11.2% during the same period. Hedge funds to achieve such a feat for a reason, and
the benefits they receive is not as easy as understood by the outside world, almost all
hedge fund managers are excellent financial broker.
Price, trading volume has been used by hedge funds derivatives (with options for
example) has three characteristics:
First, it can be a greater leveraging of funds with fewer transactions, people referred
to as hedge funds amplification, usually 20 to 100 times; when the transaction is large
enough, it can affect the price;
Secondly, according to Lorenz ? Gerlitz view, because the buyer is only right option
without obligation on the closing date, if the option exercise price (Strikeprice) is not
conducive to option holders, the holders of There can not fulfill it. This arrangement
reduces the risk of the option buyer, at the same time luring people to a more risky
investment (ie speculation);
Third, Yuehanheer view, the more deviated from the options exercise price options
underlying asset (a specific subject matter) of the spot price, the lower its own prices,
which subsequent to the hedge fund speculation, and opportunities.
Hedge fund managers found that the characteristics of financial derivatives, the hedge
funds at their disposal began to change the investment strategy to hedge their
investment strategy into a large number of transactions through the manipulation of
several related financial markets, from their profit from price changes.
Well-known hedge funds
The most famous hedge funds than George Soros's Quantum Fund and
Julian Robertson's Tiger Fund, they have created a 40% to 50%
compounded annual rate of return. To high-risk investments, as hedge funds may
bring high returns for hedge funds while bringing unpredictable losses. Largest hedge
funds are not in the vagaries of financial markets is always in an invincible position.
About Quantum Fund
George Soros Quantum Fund, the predecessor of the 1969 Double Eagle Fund was
founded by George Soros, the registered capital of 400 million. The fund was
renamed in 1973, Soros Fund, the amount of capital jumped to 12 million U.S. dollars.
Soros Fund has five different styles of hedge funds, while the Quantum Fund is the
largest, is the world's largest hedge funds, the size of one. Soros in 1979
the company changed its name again to its formal name Quantum Corporation. The
so-called take the word is derived from the quantum Heisenberg uncertainty principle
of quantum mechanics, this Law and George Soros's concept of consistent
financial markets. Law of that uncertainty: in quantum mechanics, to accurately
describe the movement of atomic particles is impossible. The Soros that: the market is
always in a state of uncertainty and constant volatility, but by significant discount, and
unpredictable factors gambling, making money is possible. The smooth functioning of
the company, get over par, the stock is based on supply and demand.
Quantum Fund, headquartered in New York, but its contributions were all
non-American nationality, foreign investors, its purpose is to avoid the U.S. Securities
and Exchange Commission regulation. Quantum Fund invests in commodities,
foreign exchange, stocks and bonds, and the extensive use of financial derivatives and
leveraged finance, in a full range of international financial operations. With Soros
excellent analytical and courage, the Quantum Fund in the world financial markets
has grown stronger. Soros has repeatedly predicted accurately due to an industry and
the company's extraordinary growth potential, and thus the rise in these
shares over the course of access to benefits. Even in the bear market decline in the
market, Soros is also short of its exquisite skill the jackpot. The end of 1997,
Quantum Fund has added value for the asset value of nearly 60 billion U.S. dollars. In
1969 into the Quantum Fund, one U.S. dollar in late 1996 has added value to 3
million, or an increase of 3 times.
About Tiger Fund
Julian Robertson, the famous agent in 1980 raised eight million U.S. dollars set up his
own company - Tiger Fund Management. In 1993, the Tiger fund management
company's hedge funds - Tiger Fund attacks pound, the lira success, and in
this operation to get enormous benefits from this reputation in Tiger Fund, sought
after by many investors, the capital since Tiger Fund rapid expansion, eventually
became America's most prominent hedge funds.
After the mid-20th century, 90 tigers fund management company's
performance is climbing, the stock and foreign exchange markets also made a lot of
money invested in the performance of the company's highest profit (net of
management fees) reached 32%, in the summer of 1998, its Total assets reached a
peak of 23 billion U.S. dollars, became the largest U.S. hedge funds.
The second half of 1998, Tiger Fund's investments in a series of mistakes,
from decline. During 1998, the Russian financial crisis, the yen against the U.S. dollar
fell to 147:1, for the price ratio is expected to drop to 150 yen below command Julian
Robertson's Tiger Fund, a large number of selling Jaguar Fund Air yen, the
yen is the Japanese economy has not improved the situation any, within two months
soared to 115 yen, Robertson suffered heavy losses. Statistics in a single day (October
7, 1998) maximum loss, the Tiger Fund will be a loss of 2 billion U.S. dollars, in
September 1998 and October, the tiger fund speculation on the yen's nearly
5 billion U.S. dollars accumulated losses .
In 1999, Robertson Shigekura U.S. Airways Group and the waste management
company's stock, but the two commercial giants of the stock price
continues to fall, the Tiger Fund has been hit again.
Starting from December 1998, nearly 20 billion dollars in short-term withdrawal of
funds from the Puma Fund, to October 1999, a total of 50 billion dollars to fund
management companies to withdraw from the Tiger, the divestment to fund managers,
investors can not focus on long-term investment, thus affecting the long-term investor
confidence. Therefore, 6 October 1999, Robertson asked from March 31, 2000
starting unit of "Tiger", "Puma",
"Puma" three to six months of the Fund's redemption
time, but to 2000 on March 31, Robertson Tiger Fund at the peak of 23 billion U.S.
dollars from 65 billion drop last resort announced it would end its six hedge funds, the
entire business. Tiger Fund after the collapse of 65 billion in assets in liquidation, of
which 80% of the return of investor Julian Robertson, personal leave continue to
invest 1.5 billion dollars.

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