After decades of evolution, hedge funds have lost the original connotation of risk hedging, and the title of hedge funds also exists in name only. Hedge fund has become synonymous with a new investment model. The following are the advantages of hedge funds compiled by Bian Xiao, for reference only, hoping to help everyone.
What are the advantages of hedge funds?
What are hedge funds relative to transactional open index funds and private equity funds? In fact, the understanding of it is that risk is a kind of profit-oriented financial fund after the combination of financial derivatives and financial instruments. Such financial derivatives generally refer to financial options and futures. Compared with other funds, hedge funds mainly obtain huge profits by hedging, transposition, hedging and hedging through various trading means. This series of characteristics actually makes them more risky, and also has the characteristics that the legal threshold is far lower than that of mutual funds.
(1) Complexity of investment activities.
In recent years, increasingly complex and innovative financial derivatives such as futures, options and swaps have gradually become the main operating tools of hedge funds. These derivatives were originally designed to hedge risks, but because of their low cost. The characteristics of high risk and high return have become a powerful tool for many modern hedge funds to speculate. Hedge funds match these financial instruments with complex portfolios, invest according to market forecasts, and obtain excess profits under accurate forecasts, or use the imbalance caused by short-term midfield fluctuations to design investment strategies to obtain the price difference when the market returns to normal.
(2) The investment effect is highly leveraged.
Typical hedge funds often use bank credit to leverage several times or even dozens of times on the basis of their original funds in order to maximize their returns. The high liquidity of securities assets of hedge funds makes it convenient for hedge funds to use fund assets for mortgage loans. A hedge fund with a capital of only 10 billion dollars can lend billions of dollars by repeatedly mortgaging its securities assets. The existence of this hit effect makes the net profit after deducting loan interest from a transaction far greater than the possible income from capital operation with only $6,543.8 billion. Similarly, it is precisely because of the leverage effect that hedge funds often face great risks of excessive losses in the case of improper operation.
(3) Private financing.
The organizational structure of hedge funds is generally partnership. Fund investors buy shares with funds, provide most of the funds, but do not participate in investment activities; Fund managers join in with funds and skills, and are responsible for the investment decisions of funds. Because hedge funds require a high degree of concealment and operational flexibility, the partners of hedge funds in the United States are generally controlled below 100, and the contribution of each partner is above 100 million US dollars. Because hedge funds are mostly private, they evade the strict requirements of American law on information disclosure of public offering funds. Due to the high risk and complex investment mechanism of hedge funds, many western countries prohibit them from publicly recruiting funds to protect the interests of ordinary investors. In order to avoid the high taxes in the United States and the supervision of the US Securities and Exchange Commission, hedge funds operating in the US market generally register offshore in some areas with low taxes and loose regulations, such as the Bahamas and Bermuda, and are limited to raising funds from investors outside the United States.
(4) The concealment and flexibility of operation.
Hedge funds and securities investment funds for ordinary investors are not only quite different in terms of fund investors, fund raising methods, information disclosure requirements and supervision degree. There are also many differences in the fairness and flexibility of investment activities. Securities investment funds generally have a clear definition of portfolio. In other words, there is a definite scheme in the choice and proportion of investment tools. For example, a balanced fund means that stocks and bonds are roughly equally divided in the fund portfolio, while growth funds refers to the investment focused on high-growth stocks. At the same time, * * * mutual funds are not allowed to use credit funds for investment, while hedge funds have no restrictions and definitions in these aspects. They can use all operational financial instruments and combinations to maximize the use of credit funds in order to obtain excess returns higher than the average market profit. Hedge funds play an important role in speculation in modern international financial markets because of their high concealment, operational flexibility and leveraged financing effect.
The advantages of hedge funds can be summarized as: 1. Lever can be used to some extent; 2. Hedge funds will have a more complete professional investment and research team, and their ability to select stocks and bonds may be stronger; 3. Funds can diversify their investments in different financial instruments to avoid the risk of a single security. Generally speaking, this is the characteristic of risk diversification of investment funds; 4. As an institutional investor, funds can buy some securities that ordinary individual investors can't buy, such as securities in the primary market.
What are the characteristics of quantitative hedge funds?
1 quantitative hedge fund risk is controllable, and its downside risk is small through hedging short mechanism.
Quantify the rational investment of hedge funds, strictly implement the model program, once the goal is achieved and the corresponding rules are triggered, computers will be bought and sold immediately, which can effectively overcome the weakness of human nature.
3 Quantify the long-term stability of hedge funds. Quantitative hedge funds aim at pursuing absolute returns and have low correlation with the performance of the stock market, so they are more prominent in the sharply adjusted market.
Quantitative hedge funds are continuously dispersed. Instead of digging deep into a stock, they earn a little money on multiple stocks through stock selection ability.
Summary: Quantitative hedge funds have lower risk expectations than general hybrid funds and equity funds, and are suitable for users who pursue long-term stable returns to invest. It is mainly to use quantitative investment to find excess returns, and then short stock index futures to obtain stable excess returns.
How to buy hedge funds
1, investment income of fund products. Different from partial stock fund products, hedge funds pursue absolute returns, and high-yield factor is the most critical point in choosing hedge funds.
2. Maximum withdrawal of fund products. The so-called maximum retracement refers to the decline of the fund's net value at any time point in a certain period, that is, the maximum loss. Obviously, the smaller the maximum retracement, the smaller the losses that investors encounter during the investment period.
3, sharp ratio. This is one of the most common indicators representing the investment risk of funds. According to the characteristics of Sharp ratio, the higher the Sharp ratio, the greater the income investors can get.