Hedge fund is a mysterious martial arts expert in the fund. Its glorious history can even be traced back to the Asian financial turmoil of 1998. Legend has it that the financial turmoil of that year was caused by hedge funds attacking Asia. The following is how the hedge funds organized by Bian Xiao operate, for reference only, hoping to help everyone.
How do hedge funds work?
For example, you have a hard-working cow, but you think that the money earned by farming alone is too small, so you study the market of cattle, and you think that the price of cattle will drop sharply after one month. So now you take your cattle to the market and sell them. I plan to buy it back after the price drops sharply in a month. A round trip can make a lot of money. But there is no such thing as a banquet that never ends, and investment is risky. It is speculated that the sharp drop in the price of cattle after one month does not mean that it will definitely fall. If the price goes up after one month, you will have to lose money if you buy the cow back (or how to farm for food in the future). You feel risky and want to avoid it. So you come up with a way, or go to the market and sell the cow at once, but discuss with the cattle dealer and buy it back at a lower price after one month. You might say, would a cattle dealer be so stupid? Cattle dealers are not stupid, because the price of selling cattle is the market price now, and the cattle dealers will not lose money, but the cattle dealers may expect the price of cattle to fall in a month, just like you, but the difference between you is that the cattle dealers are more pessimistic about the bull market. So you have a deal. Now, you sell it at the market price, and then buy it back at a fixed lower price, and you get a fixed price difference, which guarantees no loss.
The truth revealed above is the core concept of hedge funds, investing in two related things to hedge risks.
The development of hedge funds today is not limited to hedging risks, but also can be used to make big money. I won't expand it in detail here.
Quantify the characteristics of hedge funds
In recent years, with the continuous development of the securities market, financial derivatives are constantly introduced, short-selling tools are constantly enriched, the complexity of investment is also increasing, and the investment strategy and profit model have undergone fundamental changes, resulting in corresponding changes in the proportion of investors in the securities market. The proportion of professional investment managers is increasing, and it is accelerating. Among them, the quantitative hedging investment strategy with the goal of pursuing absolute return has become one of the main investment strategies of institutional investors because of its low risk and stable return.
The maximum value of the rate of return when the net product value reaches the lowest point at any historical point in the selected period. Maximum retracement is used to describe the worst possible situation after purchasing a product. Maximum retracement is an important risk indicator, which is more important than volatility for hedge funds and quantitative strategy trading. The calculation method of Sharp ratio is to subtract the difference of risk-free income from the average income of each period, and then divide it by the standard deviation of income return. It reflects the extent to which the net growth rate of unit venture fund exceeds the risk-free rate of return. If the Sharp ratio is positive, it means that the average net growth rate of the fund during the measurement period exceeds the risk-free interest rate. In the case that the interest rate of bank deposits in the same period is risk-free interest rate, it means that investment funds are superior to bank deposits. The higher the Sharp ratio, the higher the risk return of fund unit risk.
First, 1 is the preferred product with the least fluctuation of income, which has a wide investment scope and flexible investment strategy; 2. Take the pursuit of absolute return as the goal; 3. Better risk-adjusted income;
Second, the main quantitative hedging strategies are: 1. Market-neutral strategy mainly pursues to eliminate most or all of the systemic risks of the portfolio through various hedging methods, to find the pricing deviation of similar assets in the market, and to earn a small price difference in the market by using the time difference when the value returns to rationality to obtain sustained income. 2. Event-driven arbitrage strategy takes advantage of the mispricing of asset prices caused by special events to profit from mispricing. 3. The relative value strategy is mainly to make use of the relative value deviation between securities assets to make profits. Whether at home or abroad, in the long run, for example, at least one year, the investment performance that can reach a reliable ratio of more than 2 is sustainable and difficult. Investors should pay close attention to such funds that can achieve a reliable ratio of more than 2 for a long time; We do not recommend investors to invest in any fund with a reliability ratio below 0.5. 4. It has low correlation with major market indexes and has asset allocation value.
Third, the smallest product is the best product. As can be seen from the above table, Chuangyuan Duwo 1 strictly controls risks, with positive weekly returns and almost zero retracement. When choosing a hedge fund, we will consider the following risk indicators. In fact, from the perspective of absolute income, it may contain a variety of information. We need to go through the fog of performance, extract the most valuable information and make scientific choices. Quantifying the volatility of hedge fund returns is a measure of the range of returns. The greater the fluctuation of income, the greater the risk the fund bears. Don't blindly chase the product with the highest yield, because when the market falls, perhaps this fund with the highest yield will tend to fall at a faster speed, and the decline may be far greater than its performance benchmark. If investors invest in this fund, they will take higher risks. The reason is that when investors need funds and are forced to redeem their product shares, products with high volatility mean that it is more likely to be redeemed at a loss.
Fourth, no matter how it is defined, at least these two points are the current mainstream understanding: 1. The smaller the maximum retreat, the better; For example, Ming _CTA, since its establishment, has experienced the test of several huge earthquakes and has not been affected. It has maintained a steady upward trend, with a positive monthly income and a monthly decline of 0. For example, the monthly net value chart below shows a smooth and perfect net value trend straight line. 2. Retreat is directly proportional to risk. The greater the retreat, the greater the risk, and the smaller the retreat, the smaller the risk.
What are the trading modes of hedge funds?
Hedge funds can be classified into four trading modes, namely, stock index futures hedging, commodity futures hedging, statistical hedging and option hedging.
1, stock index futures
Hedging of stock index futures refers to the behavior of taking advantage of the unreasonable price of stock index futures market, participating in the trading of stock index futures and stock spot market at the same time, or trading stock index contracts with different maturities and different (but similar) categories at the same time to earn the difference. Arbitrage of stock index futures can be divided into cash hedging, intertemporal hedging, cross-market hedging and cross-variety hedging.
2. Commodity futures
Similar to the hedging of stock index futures, commodity futures also have hedging strategies. When buying or selling a futures contract, they sell or buy another related contract and close both contracts at a certain time. It is similar to hedging in transaction form, but hedging is to buy (or sell) physical objects in the spot market and sell (or buy) futures contracts in the futures market; Arbitrage only buys and sells contracts in the futures market, and does not involve spot trading. Commodity futures arbitrage mainly includes cash hedging, intertemporal hedging, cross-market arbitrage and cross-variety arbitrage.
3. Statistical hedging
Different from risk-free hedging, statistical hedging is a kind of risk arbitrage by using the historical statistical law of securities prices, and its risk lies in whether this historical statistical law will continue to exist in the future.
The main idea of statistical hedging is to find out several pairs of investment varieties (stocks or futures, etc.). ) has the best correlation, and then find out the long-term equilibrium relationship (cointegration relationship) of each pair of investment varieties. When the price difference (residual of cointegration equation) of a pair of varieties deviates to a certain extent, they start to open positions-buying relatively undervalued varieties, shorting relatively overvalued varieties, and taking profits when the price difference returns to equilibrium. The main contents of statistical hedging include stock matching transaction, stock index hedging, securities lending hedging and foreign exchange hedging transaction.
4. Option hedging
Option, also known as option, is a derivative financial instrument based on futures. The essence of option is to price the rights and obligations in the financial field separately, so that the transferee of the right can exercise his right to trade or not to trade within a specified time, and the obligor must perform it. When trading options, the buyer is called the buyer and the seller is called the seller. The buyer is the transferee of the right, and the seller is the obligor who must fulfill the buyer's right.
The advantages of options are unlimited income and limited risk loss. Therefore, in many cases, using options instead of futures for short-selling and hedging transactions will have less risk and higher returns than simply using futures arbitrage.