第十四届亚太财务经济及会计会议暨.pptVIP

Hedge Fund Market Neutral Strategies: Distinguishing Financial and Operational Risk Factors Stephen J. Brown NYU Stern Distinguishing operational and financial risk Historical perspective Operational risk Characterized by conflicts of interest Financial risk The myth of market neutrality Robust measure of tail risk neutrality Conclusion The History of Hedge Funds The first hedge fund: Alfred Winslow Jones (1949) Limited Partnership (exempt from ’40 Act) Long-short strategy 20% of profit, no fixed fee Used short positions and leverage “Hedge Fund” (Fortune magazine 1966) Tiger Fund (Institutional Investor 1986) George Soros $3.2Billion raid on the ERM (1992) CalPERS (2000) Institutional concern about risk Fiduciary guidelines imply concern for risk Financial risk Operational risk Institutional demand Growing popularity of market neutral styles Explosive growth of funds of funds Demand for “market neutral” funds of funds Operational Risk Measuring operational risk SEC registration requirement (Feb 2006) 2270 of TASS Funds that registered Had better past performance Had larger assets under management 15.8% had prior legal/regulatory problems What are the correlates of operational risk? Correlates of operational risk External conflicts Internal conflicts Towards a univariate index of operational risk Financial Risk Financial Risk Caught by the tail “SP500 returns at Treasury Bill risk” Most new funds claim to be “market neutral” Zero correlation with benchmark Zero correlation is not a strategy Zero correlation is an outcome of a strategy These strategies fail in liquidity crises Risk is considerably understated New concept: “tail risk neutrality” A market neutral strategy Data TASS hedge funds – both dead and alive US funds with at least 10 returns, average of 40 max of 120. Not a lot of data per fund, but plenty when the universe is combined – nearly 50,000 fund-month observations. An example of ‘market neutrality’ Market neutrality in the ‘real world’ Market