Hedge Fund is also called arbitrage fund or hedge fund.

The word "hedge" originally refers to the speculative method of betting between two parties to prevent losses in gambling. Therefore, speculative funds that both buy and sell in the financial market are called hedge funds.

Hedge fund operations have the following forms: 1. Market trend strategy.

For example, macro strategy mainly involves fund managers trying to predict changes in the macro environment and looking for opportunities accordingly.

If it is predicted that a country's macroeconomics will be unstable and its currency may depreciate, hedge funds will usually short-sell that country's currency in order to profit if the currency actually depreciates in the future.

This is how Tiger Management took profits in 1985 when it expected the dollar to fall.

2. Major event-driven strategies.

Take advantage of major events, such as mergers and acquisitions, bankruptcies, etc., to invest. The long side buys the merged company, while the short side sells the merging company, etc.

3. Arbitrage strategy.

For example, the stock market neutral strategy holds both short and long positions in the stock. The short position hedges the systemic risk of the long positions by adjusting the beta coefficient, so that the risk exposure of the entire investment portfolio to the changes in the entire market is very limited, and then gains profits through the selection of individual stocks.

profit.

Since hedge funds have flexible operating methods and can use a large number of derivatives in the market, 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 when making asset allocation, it can help the portfolio effectively diversify risks.

Hedge funds have so many benefits, but are they risky?

The risks of hedge funds mainly come from three categories: First, market risk.

Short selling and derivatives are the most common methods used by hedge funds to avoid risk.

However, hedge funds often choose to retain certain risk exposure positions, and coupled with leverage operations, risks will be magnified when losses occur; on the other hand, not all risks can be hedged.

The second is liquidity risk.

If the fund manager's expectations are significantly different from the market, resulting in a sharp decline in the net asset value of the investment portfolio, investors may have a large number of redemptions and provide financing leverage to reduce credit lines, and the hedge fund will have to sell the portfolio urgently in the market, which may

Experiencing liquidity risk.

The third is credit risk.

This includes the credit risk of the low-grade or crisis bonds in which it invests, as well as the credit risk of its counterparties.

In addition, many hedge funds are privately held, with less publicity and transparency and higher fees.

The more famous hedge funds, such as George Soros's Quantum Fund and Julian Roblin's Tiger Fund, have had compound annual returns of as high as 40% to 50%, with dazzling performance.

Of course, the collapse of Long-Term Capital Management in 1998 also revealed the high risks of this industry.

Although there are currently no related products in China, the subscription and put warrants mentioned in the share-trading reform plan have already used some basic derivatives. Investors can pay attention accordingly and be one step ahead.

***Tong Fund is actually a type of investment company investmentcompany.

As a company, each fund has its own managers, employees, operating methods, goals, etc.

The investment objective of a fund reflects the reason why it was established and exists.

In short, mutual funds pool a portion of the client's funds and make investments with preset purposes on behalf of their interests.

Every fund company hires investment professionals to manage the fund's investment portfolio, often called portfolio managers.

These professionals can form a team to operate funds, and some investment companies even entrust other companies or freelance investment professionals to help the company with capital operations.

*** Mutual funds pool the money of a large number of investors and employees to purchase the stocks of various manufacturers.

A portfolio of stocks, bonds, and other assets purchased on behalf of a group of investors and managed by a professional investment company or other financial institution.

There are two types of mutual funds: open-end and closed-end.

Open-end mutual funds can redeem or issue shares at any time at a net asset value (NAV), which is the market price of all securities held divided by the number of shares outstanding.

The number of shares outstanding in an open-end fund changes daily as investors buy new shares or redeem old shares.

Closed-end mutual funds do not redeem or issue shares at NAV.

Shares of closed-end funds trade through brokers like other common stocks, so their price differs from net asset value.

***Same fund means that a fund company is established in accordance with the law, raises funds by issuing shares, and investors appear as shareholders of the fund company.

It is similar in structure to a general joint-stock company, but it does not engage in actual operations. Instead, it entrusts the management and operation of assets to a fund management company and entrusts other financial institutions to take care of fund assets on its behalf.

The legal documents for its establishment are the fund company's articles of association and prospectus.