Overview of Hedge Funds Hedge funds (also known as hedge funds) are not just a certain fund. In fact, according to the return on investment, investment risk and net value fluctuation, hedge funds can be subdivided into many different types.

The word hedging tells investors that the purpose of this fund is to avoid risks as much as possible. However, hedging can tell investors another more important thing. This fund can also provide you with above-average returns.

Hedge funds will not use the lazy investment method that you and I both know, because the purpose of this investment method is not to accumulate considerable income in the short term; Hedge funds will not use guerrilla warfare to diversify their investment targets, because it is easy for fund managers who seize great opportunities to make less money. In fact, different types of hedge funds will use different smart ways to make money to achieve low-risk and high-return investment goals.

The example process of hedge fund operation borrows low-interest yen (the interest rate is less than 1%)

Convert into dollars (strong investment of dollars in emerging countries' currencies may lead to exchange differences).

(The interest rate is much higher than the yen to earn the spread)

Buy American stocks (if American stocks are long, you can make a difference)

Financing pledged US stocks to raise stock funds.

Then put it into other financial operations.

How do hedge funds make profits? Hedge funds originated in 1950' s. Usually, this form of investment behavior includes two technologies, and hedging transactions are conducted according to these two operational skills.

The first is short selling, such as selling borrowed stocks first, agreeing to repay the stocks in the future, and earning the profits from falling stocks.

The second is financial leverage, that is, borrowing money for trading.

For example, short the market index to avoid the risk of the overall decline of the market, and then borrow money to buy stocks that they think are undervalued. At this time, if the market index falls, shorting the index will generate profits, and the stock part will theoretically fall less than the market index, because the stock price has been undervalued.

When the market index rises, the short index will lose money, but the low-valued stocks they hold are usually much higher than the market index in theory, so they are still profitable. Whether the market index rises or falls, it has little impact on the profit and loss of investment positions, in recognition of its function of avoiding market risks.

The difference between hedge funds and general funds is 1. Hedge funds are measured by absolute rate of return, because no matter whether the market goes up or down, it is possible to make a profit. The performance of traditional funds is measured by a certain market index, such as S& etc. Take the performance of P500 index or other similar funds as the evaluation.

2. Hedge funds are rarely restricted. When the market falls, derivative financial products will be used for strategic trading to improve the performance of the fund. The operation of traditional funds in derivative financial products is greatly restricted, and they cannot profit from it when the market trend is weak.

3. Traditional funds charge a certain percentage of the net fund value, while managers of hedge funds charge a certain percentage of the performance fee to earn profits. It will give fund managers a strong incentive to help customers earn income, and the probability of relative risk will increase a lot.

4. Hedge funds can operate different combinations of derivative financial products to determine how high the market exposure risk is. Traditional funds cannot use derivative financial products to avoid the risk of market decline. At most, the investment portfolio of the protection fund only increases the cash ratio or engages in limited index futures operations.

Hedging, arbitrage and speculative trading are separated by a fully functional financial market, which usually allows investors to operate in both directions.

Take hedging transactions as an example.

Zhang San can get 10000 shares when he participates in the stock dividend, but the shares will not arrive in advance until three months later. In order to avoid the stock price falling during this period, Zhang San can now sell the stock by means of securities lending, and then repay it to the securities finance company when he receives the shares of China Stock Exchange two months later, so as to avoid the risk of stock price falling during this period.

arbitrate

Suppose Zhang San's friend Li Si also got 10000 shares of China. Because he is in urgent need of money, he wants to sell it to Zhang San by private transfer. China's share price is 50 yuan. Zhang San thought it was profitable, so on the day he got the ownership of the shares (because the shares have not been issued yet, he only got the ownership), and at the same time he sold Zhonghua shares 10000 shares in the form of securities lending, and the market price was not equal to the purchase price, making a profit of 50,000 yuan.

The biggest difference between arbitrage and hedging is that Zhang San has shares in China at the time of hedging, while Zhang San has no shares in China at the time of arbitrage.

Another feature of arbitrage is the concept of "buying and selling" at the same time.

If Zhang San decides to "buy" the ownership of China shares from Li Si, he must "sell" China shares at the same time, so as to make sure that he can earn a difference of 50 thousand yuan in the future; If Zhang San is lazy and borrows the securities the next day, then the result of China's stock price fluctuation may fall to 40 yuan one day later, and finally Zhang San will not make a profit or lose money. Therefore, the time of arbitrage is too early to grasp.

Zhang San thinks that 40 yuan is on the high side, so he sells 10000 shares of China by shorting. At this time, short selling becomes speculative trading. Therefore, the tool of securities lending can produce different effects according to three different purposes: hedging, arbitrage and speculation.

Hedging and arbitrage coexist in operation, and market fluctuation has a great influence on the profit and loss of positions. In particular, general derivative financial products have the same function as securities lending, but their leverage ratio is very large, and even seemingly small profits and losses will expand to unimaginable results.

Points to pay attention to when choosing hedge funds: A survey of institutional investors by Deutsche Bank confirmed that many people in the industry have always suspected that investment decisions will not be greatly affected by the cost difference of hedge funds.

Investors choose hedge funds mainly based on three aspects: concept, background and performance. According to the survey, among the participants, 42% expressed concern about the investment concept, 26% about the background and 22% about the performance. In contrast, only 1% of the respondents mentioned commission when evaluating hedge funds. This is the second year that the survey shows the immateriality of commission.

The survey was conducted for 376 asset investors around the world, who invested a total of $350 billion in hedge funds. Half of the respondents are fund investors. Among them, 16% is a family investor, 10% is a donation and foundation investment, 7% is a bank and 6% is a pension. Two-thirds of the investment comes from the United States, 1/3 from Europe and 5% from Asia.

This survey report shows great differences among investors, but there are also similarities. Most investors (60%) make a decision to invest in hedge funds within 2-6 months, but 37% make a decision less than one month when they need to invest. Family investors and fund investors prefer the latter.

For 8 1% investors, the one-year investment cycle is no problem, but 14% investors lock the investment cycle in two years. Of all the respondents, 17% own stocks in the hedge fund portfolio. Among the investors who own stocks, 50% are hedge funds, 265,438+0% are banks and 65,438+07% are family investors. Fund investors only account for 14%.

In terms of risk management, 57% of investors check their hedge fund returns monthly, 19% once a week and 14% once a quarter. Half of the investors re-measure their investment income once a month, 28% once a quarter and 12% once a year.

Most investors (6 1%) got limited information, while 36% got all the information. The main reason for wanting more information is to monitor risks and formulate strategies. In this respect, hedge funds managed by external managers are different. They need more transparent information than investment funds, families or bank investors. 65% of the respondents said that they would not consider the portfolio products in their hedge funds, while less than 65,438+0/3 of the investors planned to do so. Banks, hedge funds of other funds and insurance companies prefer to use portfolio products.

When asked about the provision of services, investors demand more extra services. Most people want the chief broker to help them meet with the fund manager and provide risk and investment reports. In fact, investors mainly look for new fund managers by talking to the chief broker. They also hope that fund managers can provide more fund information and risk levels.