The Gross Truth About Hedge Fund Performance And Risk
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| Author | : Chris Brooks |
| Publisher | : |
| Total Pages | : 20 |
| Release | : 2008 |
| Genre | : |
| ISBN | : |
Factor models are frequently applied to hedge fund returns in an attempt to separate the return from identified risk factors (beta) and from manager skill (alpha). More recently, these same techniques have been used to replicate the returns from hedge fund strategies with varying degrees of success. In this paper, we show that due to the particular nature of hedge fund incentive contracts, the use of net of fee returns can lead to considerably biased estimates of factor exposures which can distort the picture of fund manager performance. The solution we propose is to model the gross returns of hedge funds and the incentive fees independently, which gives a truer representation of the underlying return generating process. Using a large sample of hedge funds, we quantify the effect of this bias on both performance attribution and replication. We find that using net of fee returns understates the return attributable to beta by up to 58 basis points per annum. Following from this we find that some of the additional beta exposure can be captured by basing replication on gross rather than net returns. We also investigate the risk taking behaviour of fund managers conditional upon the delta of their incentive option and find that contrary to previous studies, there does appear to be evidence of increased risk taking for those managers who find themselves significantly below their high water mark.
| Author | : Cathleen M. Rittereiser |
| Publisher | : John Wiley & Sons |
| Total Pages | : 245 |
| Release | : 2017-10-09 |
| Genre | : Business & Economics |
| ISBN | : 0470501294 |
A professional's guide to the world of hedge fund investing Throughout the financial crisis of 2008, many hedge funds suffered massive losses and were often blamed for the extreme market upheavals. In the wake f the crisis, hedge funds remain a source of fascination for the media, legislators, and investors, mostly due to misunderstanding. Historically portrayed as risky investment funds for the very wealthy run by swashbuckling traders, the truth is hedge funds are simply an investment vehicle designed to generate superior returns and reduce an investor's overall portfolio risk. Investors have good reasons to remain fascinated with hedge funds. Although many individual funds have underperformed or collapsed, hedge funds as a whole have provided solid returns while reducing risks. Savvy institutions have invested in hedge funds for many years and have made them a large and powerful force in the markets. Investing in hedge funds requires sophisticated knowledge, understanding, skill, access, and experience. Individuals and institutions, whether they are new to hedge funds or need to improve, can find those attributes in the stories of the successful hedge fund investors profiled in Hedge Fund Investors. Hedge Fund Investors chronicles the challenges and rewards these investors face, in selecting hedge fund managers, managing risks, and constructing portfolios. In revealing conversations, leading hedge fund investors who place hundreds of billions of dollars in hedge funds, share their philosophies, strategies, and advice. Profiles a variety of different investors from the pioneers in hedge fund investing to managers for high net-worth individuals and fund of funds investors Discusses winners and losers in the recent market decline, problematic hedge fund strategies, and how these current events will change future strategies Provides lessons, insights, and advice beneficial to all hedge fund investors Engaging and informative, Hedge Fund Investors will prove valuable to anyone involved in placing money with hedge funds, as well as hedge funds who seek to better understand their clients.
| Author | : H. Kent Baker |
| Publisher | : Oxford University Press |
| Total Pages | : 697 |
| Release | : 2017-07-26 |
| Genre | : Business & Economics |
| ISBN | : 0190607386 |
Hedge Funds: Structure, Strategies, and Performance provides a synthesis of the theoretical and empirical literature on this intriguing, complex, and frequently misunderstood topic. The book dispels some common misconceptions of hedge funds, showing that they are not a monolithic asset class but pursue highly diverse strategies. Furthermore, not all hedge funds are unusually risky, excessively leveraged, invest only in illiquid asses, attempt to profit from short-term market movements, or only benefit hedge fund managers due to their high fees. Among the core issues addressed are how hedge funds are structured and how they work, hedge fund strategies, leading issues in this investment, and the latest trends and developments. The authors examine hedge funds from a range of perspectives, and from the theoretical to the practical. The book explores the background, organization, and economics of hedge funds, as well as their structure. A key part is the diverse investment strategies hedge funds follow, for example some are activists, others focusing on relative value, and all have views on managing risk. The book examines various ways to evaluate hedge fund performance, and enhances understanding of their regulatory environment. The extensive and engaging examination of these issues help the reader understands the important issues and trends facing hedge funds, as well as their future prospects.
| Author | : Greg N. Gregoriou |
| Publisher | : John Wiley & Sons |
| Total Pages | : 487 |
| Release | : 2011-08-04 |
| Genre | : Business & Economics |
| ISBN | : 1118161033 |
Whether already experienced with hedge funds or just thinking about investing in them, readers need a firm understanding of this unique investment vehicle in order to achieve maximum success. Hedge Funds unites over thirty of the top practitioners and academics in the hedge fund industry to provide readers with the latest findings in this field. Their analysis deals with a variety of topics, from new methods of performance evaluation to portfolio allocation and risk/return matters. Although some of the information is technical in nature, an understanding and applicability of the results as well as theoretical developments are stressed. Filled with in-depth insight and expert advice, Hedge Funds helps readers make the most of this flexible investment vehicle.
| Author | : John M. Longo |
| Publisher | : World Scientific |
| Total Pages | : 333 |
| Release | : 2009 |
| Genre | : Business & Economics |
| ISBN | : 9812834664 |
Hedge funds are perhaps the hottest topic in finance today, but little material of substance to date has been written on the topic. Most books focus on how to set up a hedge fund and the basic strategies, while few to none focus on what matters most: generating and understanding investment performance. This book takes an exclusive look at the latter, including an analysis of the areas that are most likely to generate strong investment returns OCo namely, the emerging markets of Brazil, Russia, India and China. The book will be invaluable to not only financial professionals, but anyone interested in learning about hedge funds and their future.
| Author | : Sam Kirschner |
| Publisher | : John Wiley & Sons |
| Total Pages | : 256 |
| Release | : 2006-11-17 |
| Genre | : Business & Economics |
| ISBN | : 0470048549 |
"Eldon Mayer is a battle-tested pro. You should listen to what he and his partner, Sam Kirschner, have to say." --Barton M. Biggs, Managing Partner, Traxis Partners Meet the crème de la crème of the new breed of hedge fund managers, learn how they evaluate world financial markets, hear about their winners and losers, and discover how they apply proprietary strategies to stay ahead of the curve. Through broad-scope interviews with 15 highly successful managers, The Investor's Guide to Hedge Funds provides unparalleled insight into each major hedge fund strategy, its strengths, weaknesses, and performance characteristics. Most importantly, this book shows that despite the sensational headlines, adding hedge funds to a portfolio of stocks and bonds can reduce risk and improve overall performance.
| Author | : Greg N. Gregoriou |
| Publisher | : Beard Books |
| Total Pages | : 385 |
| Release | : 2003 |
| Genre | : Business & Economics |
| ISBN | : 158798203X |
Twenty-one contributions from academics and practitioners discuss recent research on hedge funds. Aimed at investment professionals and high net worth individuals, the text deals with current methods of hedge fund tracking, evaluation, and selection. Sample topics include convertible arbitrage funds
| Author | : Vikas Agarwal |
| Publisher | : Now Publishers Inc |
| Total Pages | : 85 |
| Release | : 2005 |
| Genre | : Business & Economics |
| ISBN | : 1933019174 |
Hedge Funds summarizes the academic research on hedge funds and commodity trading advisors. The hedge fund industry has grown tremendously over the recent years. According to some industry estimates, hedge funds have increased from $39 million in 1990 to about $972 million in 2004 and the total number of hedge funds has gone up from 610 to 7,436 over the same period. At the same time, hedge fund strategies have changed significantly. In 1990 the macro strategy dominated the industry while in 2004 the equity hedge strategy had the largest share of the market. There has also been a shift in the type of investor in hedge funds. In the early 1990's the typical investor was a high net-worth individual investor, today the typical investor is an institutional investor. Thus, the hedge fund market has not only grown tremendously, but the nature of the market has changed. Despite the enormous growth of this industry, there is limited information available on hedge funds. As a result, there is a need for rigorous research from both the investors' and regulators' point of view. Investors need research to better understand their investment and their risk exposure. This research also helps investors recognize the extent of diversification benefits hedge funds offer in combination with investments in traditional asset classes, such as stocks and bonds. Regulators can use this research to identify situations where regulation may be needed to protect investors' interests and to understand the impact hedge funds trading strategies have on the stability of the financial markets. The first part of Hedge Funds summarizes hedge fund performance, including comparisons of risk-return characteristics of hedge funds with those of mutual funds, factors driving hedge fund returns, and persistence in hedge fund performance. The second part reviews research regarding the unique contractual features and characteristics of hedge funds and their influence on the risk-return tradeoffs. The third part reviews the role of hedge funds in a portfolio including the extent of diversification benefits and limitations of standard mean-variance framework for asset allocation. Finally, the authors summarize the research on the biases in hedge fund databases.
| Author | : IMCA |
| Publisher | : John Wiley & Sons |
| Total Pages | : 225 |
| Release | : 2003-03-10 |
| Genre | : Business & Economics |
| ISBN | : 0471473421 |
A well-rounded hedge fund guide for the serious financial professional Alternative investment strategies-hedge funds in particular-have experienced a significant resurgence recently, largely in response to the dramatic downturn of the global equity markets. In response to this explosion in popularity, this book focuses on many of the best moneymaking strategies related to these alternative investment vehicles. IMCA (The Investment Management Consultants Association) is a professional association established in 1985, representing the investment consulting profession in the U.S. and Canada. Kenneth S. Phillips is a member of the IMCA Advisory Council and Managing Principal of Capital Partners, LLC. Ron Surz, CIMA, is a member of the IMCA Board of Directors and the President of PPCA Inc.
| Author | : Jason A. Scharfman |
| Publisher | : John Wiley & Sons |
| Total Pages | : 324 |
| Release | : 2008-12-03 |
| Genre | : Business & Economics |
| ISBN | : 0470372346 |
How to diagnose and monitor key hedge fund operational risks With the various scandals taking place with hedge funds, now more than ever, both financial and operational risks must be examined. Revealing how to effectively detect and evaluate often-overlooked operational risk factors in hedge funds, such as multi-jurisdictional regulatory coordination, organizational nesting, and vaporware, Hedge Fund Operational Due Diligence includes real-world examples drawn from the author's experiences dealing with the operational risks of a global platform of over 80 hedge funds, funds of hedge funds, private equity, and real estate managers.
