Hedge Fund is also called arbitrage fund or hedge fund. Hedge (Hedge) originally meant to refer to the speculative method of using two bets to prevent losses in gambling. Therefore, speculative funds that are bought and sold in the financial market are called hedge funds.

American hedge funds have developed with the development of American financial industry, especially the emergence of futures and options transactions. At present, there are at least 4,2 hedge funds in the United States with a total capital of over $3 billion.

1. Characteristics of hedge funds

The biggest feature of hedge funds is speculative trading in loans, that is, short selling. About 85% hedge funds in the United States speculate on loans. After selecting the right market or project, they make huge loans to commercial banks, investment banks or stock exchanges with a small amount of capital as the bottom, and then pour a lot of money into annihilation, or lose or win. Their investment strategy is absolutely confidential. Since 199s, the risk coefficient of American hedge funds has been increasing, but most of them are successful.

2. Classification of hedge funds

It can be divided into low-risk hedge funds, high-risk hedge funds and crazy hedge funds by trading means.

① low-risk hedge funds. Mainly in the United States and foreign stock market investment, generally rarely with more than twice their own capital for speculative trading. Trading methods are mainly long-term buying and short-selling, that is to say, buying stocks that may rise, borrowing and selling stocks that may fall; After the market improves, buy back these stocks;

② high-risk hedge funds. Speculative transactions are often carried out with loans that are 25 times higher than capital, and both long-term purchases and short-term sales are carried out in the global stock market, as well as large-scale speculative transactions in global markets such as bonds, currencies and commodity futures. A typical example is the quantum fund operated by Soros;

③ Crazy hedge funds. Speculation in the international financial market with loans ten times or even dozens times higher than its own capital. The most typical example of this kind of hedge fund is the American Long-term Capital Management Fund, which once borrowed more than 1 billion dollars from banks with assets of more than 4 billion dollars, and the market value of various securities and stocks it bought and sold was as high as 1.25 trillion dollars, which led to the outbreak of the American hedge fund incident in September 1998.

3. Differences between hedge funds and * * * funds

In a broad sense, hedge funds are also a kind of * * * funds, but compared with ordinary * * * funds, hedge funds have many unique features:

① investor qualification. Investors in hedge funds have strict qualification restrictions. American securities law stipulates that they should participate in the name of individuals, and their annual income in the last two years should be at least 2, US dollars. If you participate in the family name, the couple's income in the last two years is at least 3, US dollars; If it participates in the name of an institution, its net assets shall be at least USD 1 million. In 1996, new regulations were made: the number of participants was expanded from 1 to 5. The condition of participants is that individuals must own investment securities worth more than $5 million. And the general * * * with the fund without this restriction.

② operation. The operation of hedge funds is not restricted, and there are few restrictions on investment portfolios and transactions. Major partners and managers can freely and flexibly use various investment technologies, including short selling. Trading and leverage of derivatives. And the general * * * fund is more restricted in operation.

③ supervision. Hedge funds are not regulated at present. The Securities Act of 1933, the Investment Company Act of securities exchange act of 1934 and the Investment Company Act of 194 in the United States have stipulated that institutions with less than 1 investors do not need to register with the US Securities and Exchange Commission and other financial authorities when they are established, and they can be exempted from regulation. Because investors are mainly a few very sophisticated and wealthy individuals, they have strong self-protection ability. In contrast, the supervision of mutual funds is relatively strict, mainly because investors are the general public, and many people lack the necessary understanding of the market. In order to avoid public risks, protect the weak and ensure social security, strict supervision is implemented.

④ financing methods. Hedge funds are generally initiated through private placement, and the securities law stipulates that they should not use any media to advertise when attracting customers. Investors mainly participate in four ways: according to the so-called "reliable investment news" obtained in the upper class; Know the manager of a hedge fund directly; Transfer through other funds; By the investment bank. Special introduction of securities intermediary companies or investment consulting companies. And the general * * * fund is mostly through public offering, public advertising to entertain customers.

⑤ whether it can be established offshore. Hedge funds usually set up offshore funds, the advantage of which is that they can avoid the restrictions on the number of investors and tax avoidance in American law. Usually located in tax shelters such as Virgin Island, Bahamas, Bermuda, Cayman Island, Dublin and Luxembourg, the tax revenue of these places is very small. Of the $68 billion hedge funds counted in November 1996, $31.7 billion was invested in offshore hedge funds. According to statistics, if the "fund of the fund" is not included, the assets managed by offshore funds are almost twice that of onshore funds. The general * * * fund cannot be established offshore.