Equity hedge funds - Yale University：股票对冲基金-耶鲁大学.pptVIP

Motives for Investing Potential for Attractive absolute return LIBOR plus 3% to 8%, depending on risk tolerance Volatility lower than standard equity benchmarks Low correlation with standard markets, especially in down markets Above points apply to a diversified portfolio of hedge funds. Individual funds are substantially more risky. Issues Return/risk profile Historical Expected Sources of return and risk Leverage and short selling Performance fees Transparency Is there a hedge fund bubble? A Cautionary Note on Historical Data Many databases suffer from biases that may skew the returns upward. Survivor bias “Bad news travels slow” Many indexes show historical records that precede the construction of the index: these are purely hypothetical results. EACM100? Index* Public record since January 1996 100 managers covering all main strategies and sub-strategies Qualitative manager screening Major Hedge Fund Categories Historical Risk/Return Characteristics Performance in SP 500 Negative Months Two Kinds of Strategies Many hedge fund strategies employ “enhanced active management”: traditional active management enhanced with short selling, leverage, and other techniques. For example: Market neutral equity Fixed income arbitrage Equity hedge funds Global macro investing Some hedge fund strategies are genuinely distinctive, not based on traditional techniques. These strategies are important sources of liquidity for financial markets. Convertible hedging Risk arbitrage Distressed debt How Do Hedge Funds Make Money? Hedge funds make money the old-fashioned way: they take risk. Beware of common stories that underestimate risk: “They exploit market inefficiencies” – not enough to go around “They supply liquidity to markets” – some do, some don’t “They take advantage of manager skill” – there are many skilled managers in the long-only universe, and many hedge fund managers who are not as skilled as they think. Do Hedge Funds Make Money? Our working assumption is that hedge