Funds that use hedging transactions are called hedge funds, also known as hedge funds or hedge funds. General hedging is to conduct two transactions at the same time, both related to the market, in the opposite direction, with the same amount and breakeven. The purpose of hedge fund operation is to use financial derivatives such as futures and options, as well as the operational skills of buying and selling different related stocks and hedging risks, which can avoid and resolve investment risks to a certain extent.

The difference between hedge funds and traditional investment funds

1. The trading mode is flexible, which can not only analyze the operation according to the macro information surface, but also rely on the data model to judge the trend operation and rely on the value strategy operation.

2. It has a short selling mechanism. You can go long or short. When the market index is likely to fall, we can avoid the risk by shorting the stock index.

3. Leveraged trading model. That is, margin trading, spending 100 yuan to buy 1000 yuan of stocks, amplifying the expected annualized expected return.

4. Avoid regulatory constraints. Compared with traditional investment funds, hedge funds are more free.

Can hedge fund model make money?

The two main points of hedge fund operation are: outperforming the market and breaking even. The detailed explanation is that the stock long and short strategy mainly has two selling points and purposes. One is to beat the market by creating an unexpected annualized expected return (α) or selecting stocks in the market cycle, and the other is to keep the principal from being eroded when the market falls.

Pension Partners uses the following chart to illustrate that the stock hedge strategy fund in the hedge fund industry seems to have declined for more than 20 years, and the rolling annualized α has declined for 3 years, and fell below the negative value for 2 years:

The ability of hedge fund industry to create α seems to be inversely proportional to its scale growth. By the end of May, according to the data of hedge fund research institute HFRI, the expected annualized return of stock hedge funds in the past 12 months was 0, while the increase of S&P 500 was 0 in the same period. However, hedge funds still do a good job in capital protection. In the market crashes of 1990, 1998 and 2000-2002, assets declined slightly, but in the bear market of 2007-2009, hedge funds did not perform well, with the largest retracement exceeding 30%, once lagging behind the market by 201/kloc-0.