investments and portfolio management Hedge Funds推荐.docxVIP

Chapter26: Hedge FundsChapter OpenerPART??VIIp. 903WHILE MUTUAL FUNDS are still the dominant form of investing in securities markets for most individuals, hedge funds enjoyed far greater growth rates in the last decade, with assets under management increasing from around $200 billion in 1997 to nearly $2 trillion before declining asset prices and hefty withdrawals during the market downturn of 2008 reduced that value to around $1.5 trillion in late 2009. Like mutual funds, hedge funds allow private investors to pool assets to be invested by a fund manager. Unlike mutual funds, however, they are commonly organized as private partnerships and thus not subject to many SEC regulations. They typically are open only to wealthy or institutional investors.?Hedge funds touch on virtually every issue discussed in the earlier chapters of the text, including liquidity, security analysis, market efficiency, portfolio analysis, hedging, and option pricing. For example, these funds often bet on relative mispricing of specific securities, but hedge broad market exposure. This sort of pure “alpha seeking” behavior requires a procedure for optimally mixing a hedge fund position with a more traditional portfolio. Other funds engage in aggressive market timing; their risk profiles can shift rapidly and substantially, raising difficult questions for performance evaluation. Many hedge funds take extensive derivatives positions. Even those funds that do not trade derivatives charge incentive fees that resemble the payoff to a call option; an option-pricing background therefore is necessary to interpret both hedge fund strategies and costs. In short, hedge funds raise the full range of issues that one might confront in active portfolio management.?We begin with a survey of various hedge fund orientations. We devote considerable attention to the classic “market-neutral” or hedged strategies that historically gave hedge funds their name. We move on to evidence on hedge fund performance, and