It is a form of investment fund, which means "risk hedge fund". Hedge funds use various trading methods to hedge, transpose, hedge and hedge to 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.
Broadly speaking, in the financial market, some fund organizations use financial derivatives to adopt various investment strategies for profit. These fund organizations are called hedge funds, not literally "funds with hedging strategies".
Now hedge funds have long lost the connotation of risk hedging. On the contrary, it is generally believed that hedge funds are actually 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, and actually represent a class of financial assets.
Characteristics of hedge funds
Hedge funds generally have the following four characteristics: high leverage of investment effect, complexity of investment activities, private placement of financing methods, concealment and flexibility of operation.
1. High leverage
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. The existence of leverage also makes hedge funds a high-risk and high-return investment model.
2. Complexity
With the increasingly complex structure and innovative mode, various 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 portfolio design, invest according to market forecast, and obtain excess profits when the forecast is accurate, or use the unbalanced investment strategy generated by short-term midfield fluctuation to obtain the price difference when the market returns to normal.
3. Direct sales when issuing bonds
Hedge funds are mostly private, and the organizational structure is generally partner system. 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 high concealment and flexibility in operation, generally speaking, investors are large fund holders, and the number will be controlled within a certain range (usually less than 100 in the United States and less than 50 in Japan).
4. Concealment and flexibility
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.
The Development of Hedge Funds in China
With the diversification and internationalization of China's financial and capital markets, more and more overseas hedge funds pay attention to China. At the important stage of the vigorous development and perfection of domestic hedge funds, overseas hedge funds with rich international capital have also turned their attention to the cake of China. Many overseas hedge funds or people who have had experience in hedge fund management and investment abroad are ready to try or have settled in China to seek development and cooperation opportunities.
Overseas hedge funds value the development of China. In fact, it is nothing more than three reasons:
First, the gradual internationalization of RMB and the gradual opening up of cross-border RMB assets will provide a large number of opportunities for some domestic asset managers or investors to go abroad, and at the same time provide a large number of overseas institutional investors and high-net-worth customers with opportunities to enter the China market.
Secondly, the attitude of regulators and China fund industry towards hedge funds is becoming more and more open, and the fund law is constantly being revised and improved, which makes the secondary market in which hedge funds participate have more liquidity, so that hedge funds can really develop.
The third is the appreciation of Chinese wealth. The bank's high-net-worth customers manage funds of 17 trillion, while the scale of funds managed by Public Offering of Fund is only 2 trillion, and Sunshine Private Equity is only 250 billion. In the future, China people's wealth will flow to more effective and actively managed investment fields.