Hedge funds use various trading methods (such as short selling, leverage, program trading, swap trading, arbitrage trading, derivatives, etc. ) to hedge, transpose, hedge, and make huge profits. These concepts have gone beyond the traditional operation scope of preventing risks and ensuring benefits. In addition, the legal threshold for launching and establishing hedge funds is much lower than that of mutual funds, which further increases their risks. In order to protect investors, the securities management agencies in North America classify it as a high-risk investment category, and strictly restrict the participation of ordinary investors. For example, it is stipulated that each hedge fund should have less than 100 investors and the minimum investment is $6,543,800+0 million. The other is: Haiji.
For example, in the most basic hedging operation. After the fund manager bought a stock, he also bought a put option with a certain price and time limit. The utility of put option is that when the stock price falls below the option-limited price, the holder of seller option can sell his stock at the option-limited price, thus hedging the risk of stock decline.
For another example, in another hedging operation, the fund manager first chooses a bullish industry, buys a few good stocks in this industry, and sells a few bad stocks in this industry according to a certain proportion. The result of this combination is that if the industry is expected to perform well, the increase of high-quality stocks will definitely exceed other inferior stocks in the same industry, and the gains from buying high-quality stocks will be greater than the losses from shorting inferior stocks; If the expectation is wrong, the stocks in this industry will fall instead of rising, then the decline of inferior stocks will be greater than that of high-quality stocks, and the profit of short selling will be higher than the loss caused by the decline of buying high-quality stocks. Because of this mode of operation, the early hedge fund can be said to be a form of fund management based on the conservative investment strategy of hedging.
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, that is, based on the latest investment theory and extremely complex financial market operation skills, making full use of the leverage of various financial derivatives, taking high risks and pursuing high returns.
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. That is, based on the latest investment theory and extremely complicated financial market operation skills, we should make full use of the leverage of various financial derivatives and take high risks. Pursuing a high-yield investment model. Today's hedge funds have the following characteristics:
(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, high risk and high return, they have become effective tools 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 leverage 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 flexibility in operation, the number of partners in American hedge funds is generally controlled below 100, and the contribution of each partner is above1000 (different countries have different regulations on hedge funds, such as the number of partners in Japanese hedge funds is controlled below 50). 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 plan for the choice and proportion of investment tools. For example, a balanced fund means that stocks and bonds in the fund portfolio are roughly equally divided, and growth funds means that investment is concentrated in high-growth stocks; At the same time, * * * mutual funds are not allowed to use credit funds for investment, while hedge funds are completely exempt from these restrictions and definitions. 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.