The operation of hedge funds has the following forms:
1. Market trend strategy. Such as macro-strategy, mainly fund managers try to predict macro-environmental changes and look for opportunities accordingly. If it is predicted that a country's macro-economy is unstable and its currency may depreciate, hedge funds usually short the country's currency in order to make a profit when the country's currency actually depreciates in the future. This is how Tiger Fund 1985 made a profit when the dollar fell.
Second, the major event-driven strategy. Take advantage of major events, such as mergers and acquisitions, bankruptcy, etc. To invest, buy the acquired company long and sell the acquired company short.
Third, arbitrage strategy. For example, the neutral strategy of the stock market holds both short positions and long positions. By adjusting the beta coefficient, the systemic risk of long positions is hedged, so that the risk exposure of the entire portfolio to the whole market changes is very limited, and then profits are made by selecting individual stocks.
Because of the flexible operation mode of hedge funds, they can use a large number of derivatives in the market, so they can effectively reduce risks. At the same time, the correlation between hedge funds and between hedge funds and other traditional asset classes is low, so it can help the portfolio to effectively spread risks when allocating assets.
Hedge funds have so many benefits, so how big is the risk? The risks of hedge funds mainly come from three categories:
The first is market risk. Short selling and derivatives are the most commonly used methods for hedge funds to avoid risks. However, hedge funds often choose to keep a certain risk exposure position, and leverage will amplify the risk when losses occur; On the other hand, not all risks can be hedged.
The second is liquidity risk. If there is a big difference between the fund manager's expectations and the market, resulting in a sharp drop in the net asset value of the portfolio, investors may have a large number of redemptions and provide financing leverage to reduce the credit line, and hedge funds will have to sell their portfolios in the market urgently and may encounter liquidity risks.
The third is credit risk. This includes the credit risk of low-grade or crisis bonds invested and the credit risk of counterparties. In addition, many hedge funds are privately held, with low openness and transparency and high costs.
Well-known hedge funds, such as george soros's Quantum Fund and julien's Tiger Fund, once had a compound annual rate of return of 40% to 50%, and their performance was dazzling. Of course, the collapse of 1998 long-term capital management company also revealed the high risk of this industry. Although there are no related varieties in China at present, some basic derivatives have been used in the call and put warrants mentioned in the share-trading reform plan, so investors can pay attention to them accordingly and get ahead of others.
* * * The same fund is actually an investment company. As a company, each fund has its own manager, employees, operation mode and objectives. The investment objectives of the fund reflect the reasons for its establishment and existence. In short, * * * collects part of the clients' funds into the fund and invests for the preset purpose on behalf of their interests. Every fund company will hire investment professionals to manage the fund's portfolio, usually called portfolio manager. These professionals can form a team to run the fund, and some investment companies even entrust other companies or free investment professionals to help the company with capital operation. * * * The same fund is to collect a large number of investors and employees' money to buy stocks of various manufacturers. A combination of stocks, bonds and other assets purchased in the name of a group of investors and managed by professional investment companies or other financial institutions.
There are two types of funds: open and closed.
Open-end mutual funds can redeem or issue shares at any time with net asset value, which is the market price of all securities divided by the number of shares issued. As investors buy new shares or redeem old ones, the number of shares issued by open-end funds changes every day.
Closed-end funds do not redeem or issue shares with net assets. Shares of closed-end funds are traded through brokers like other common stocks, so their prices are different from their net asset values.
* * * A mutual fund refers to a fund company established according to law, which raises funds by issuing shares, and investors appear as shareholders of the fund company. It is similar to a common joint-stock company in structure, but it does not engage in actual operation. Instead, it entrusts assets to fund management companies for management and operation, and entrusts other financial institutions to keep fund assets on its behalf. The legal documents for its establishment are the articles of association and prospectus of the fund company.