What exactly is an American hedge fund? How to hedge?
Me: hedge funds don't need to hedge, in fact, they are domestic private placements ~
He: That's not right. How can hedge funds and private placement be the same thing? Hedge funds must use some hedging strategies, please help me check!
Me: $
In China, it is usually called private placement.
The English word for "private fund" is "PrivatelyOfferedFund", which corresponds to "-PubliclyOfferedFund", which refers to whether the fund is privately offered or publicly offered.
This "private fund" should be distinguished from "private equity", which is called "private equity" in China. This difference will be further explained when answering the third question below.
At first glance, the conclusion that "hedge funds are private placements" seems a bit counterintuitive.
In our impression, "hedge funds" seem to be all tall fund companies, while "private placement" sounds like an informal fund company.
It is also said that "hedge fund" is a relatively large flagship fund among private equity funds.
These two statements also have some basis, but they are not accurate.
This is actually the confusion caused by the different regulatory systems between China and the United States.
In the United States, regulators have strict requirements on the supervision of investment funds that raise funds from the public and make collective investments, and have strict legal requirements on information disclosure, profit distribution and operation mechanism of funds. These laws are mainly to protect small and medium investors. Therefore, the fund registered with the US regulatory authorities and strictly meeting various disclosure requirements is Public Offering of Fund, which is usually called "mutual fund" in the United States.
However, these legal requirements can also be waived. Funds that meet the following two conditions can be exempted from registration and strict supervision. These two conditions are:
(1) Number of fund investors/institutions
(2) All investors can prove to be "high net worth qualified customers". (The annual income of individual investors is > 200,000 USD, or the net asset value is > 1 10,000 USD; Total assets of institutional investors >; $5 million)
If the above two requirements are met, the fund pool can be registered with the regulatory authorities, and various investment rules can be formulated by itself without meeting the disclosure requirements, which is to say, it has become a "private equity fund".
From the perspective of investors, those who do invest in private equity/hedge funds are all high-net-worth individuals or institutions, and they raise funds in a relatively "tall" circle.
However, the fund does not stipulate how much these "high-ranking" customers should invest, and the minimum investment threshold is determined by the fund manager.
Therefore, in terms of capital scale, private equity/hedge funds are also large and small, but regardless of size, they can all be called hedge funds. In addition, because private equity funds are limited by 100 people, the scale of many Public Offering of Fund funds far exceeds that of hedge funds.
In China, because "private placement" is a popular fund form in recent years, the regulatory authorities are not as strict with investors of private placement funds as in the United States, and the enforcement is still insufficient. Therefore, the current domestic "private placement" presents a phenomenon of different sizes and mixed quality.
It is also because of the recent emergence of many private fraud cases that some people have formed the impression that "private placement = non-standard".
In addition, because your imaginary hedge fund is very tall, many private placements are embarrassed to equate themselves with hedge funds, and calling themselves "private placements" seems a bit modest.
But in essence, American hedge funds are private placements in China, and the scale of many domestic private placements far exceeds that of some American hedge funds.
What does a hedge fund do and what does it have to do with hedging?
According to the current literature, the first so-called "hedge fund" was founded by a man named AlfredJones in the United States on 1949.
Alfred read an article in the 1948 issue of Fortune magazine discussing the investment trend at that time, so he had a feeling and wanted to try to manage his own investment. He raised $65,438+000,000 (including his own $40,000) and tried to trade with the strategy of "long and short stocks" to "hedge" the risks of some long stocks and keep the total risk of the fund as low as possible. In addition, he also used "leverage" in the fund to increase returns.
1952, AlfredJones adjusted the investment structure of his fund and transformed it into a "limited partner" system, charging investors 20% income.
As the first fund to combine "short stock", "leverage", "partner risk" and "profit commission", AlfredJones won the title of "father of hedge funds".
Since then, the above characteristics have also become the symbol of such funds.
Because Alfred's fund uses short stocks to "hedge" risks, people call this kind of fund represented by him "hedge fund", and his fund has also created the era of private equity in the United States.
So "hedge fund" was really related to "hedging" at first, and it was named after the "hedging" of stocks. However, with the development of the private equity industry, more and more private equity funds are emerging, and the trading strategies adopted are even more varied, which has long been out of the bondage of "long and short stocks".
Any private equity fund with one or more elements of leverage, partnership, revenue sharing and risk control management can call itself a hedge fund.
To sum up, hedge funds don't have to hedge.
What are the connections and differences between hedge funds and private placements, public offerings, funds and private placements?
When the above two questions are clarified, this problem will be clear at a glance!
Private placement = hedge fund, which is a different expression of "PrivatelyOfferedFund" in China and the United States;
Public offering = * * * the same fund, which is a different view of "PubliclyOfferedFund" between China and America;
Private equity =PE(PrivateEquity) is a private equity fund raised for the purpose of acquiring company equity.
That's right! In fact, strictly speaking, PE is also a form of private equity/hedge fund. Judging from the way of raising funds, it is privately raised by unregistered high-net-worth customers, but the investment goal is quite special, that is, buying company equity. In the United States, many hedge funds include some equity acquisition strategies.
split line
All three questions have been answered. Let's make a brief summary.
What kind of fund is a hedge fund?
Hedge funds are private equity funds.
What does a hedge fund do and what does it have to do with hedging?
It was named after the first "hedging" strategy in history, but now hedge funds may not all do hedging strategies.
What are the connections and differences between hedge funds and private placements, public offerings, funds and private placements?
Private placement = hedge fund (Chinese and American expressions are different);
Public offering = * * * the same fund (Chinese and American expressions are different);
Private placement =PE is an investment form of private placement fund.
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