Although the investment methods of private equity funds are different, most private equity funds employ professionals to be responsible for fund management, adopt accurate quantitative models, and implement so-called programmed investment decision management for investment transactions. For example, among the partners of Long-term Capital Management Company are 1997 Nobel Prize winners Merton and Scholes. They hire doctoral students from some universities to trade, calculate the price differences of various related securities through pricing models, and seize trading opportunities.
General situation of development
Private fund is a kind of fund type relative to public fund. Private equity fund is a small private investment company, which adopts partnership system and mainly invests in publicly traded securities and derivative financial products. It is a high-risk speculative fund. Since the 1990s, with the deepening of financial globalization and the innovation of various investment tools, the private equity fund industry in the United States has made great progress, with the number and scale of funds increasing by 20% every year, and now it has become the fastest-growing force in the financial field in the United States. At present, there are at least 4,200 private equity funds in the United States, with a total capital of over $300 billion.
American private equity funds have a wide range of investment fields and various investment methods. During the period of 1998, American pioneer hedge fund research company and other institutions studied the investment strategies of American private equity funds, and they classified American private equity funds into 16 categories according to different investment strategies. But generally speaking, there are two kinds of private equity funds in the United States: one is macro fund and the other is relative value fund. Macro-capital mainly uses the instability of macro-economy in various countries to carry out unbalanced macro-economic arbitrage activities. Macrofund collects and studies the macroeconomic situation of countries around the world. When it is found that a country's macroeconomic variables deviate from the equilibrium value, it will concentrate on a large number of reverse operations on the target country's stock market, interest rate, exchange rate and physical objects. When the country's macroeconomic situation changes, asset prices will depreciate sharply, and macro funds will get huge profits from it. It is generally believed that macro-capital is risky and destructive to the global financial system and is often accused of being the maker of financial crisis. The representative of macro fund is the quantum fund led by the famous Soros. Relative value funds are different from macro funds. Generally speaking, they do not bear big market risks, but only invest in the relative prices of closely related securities. Because the relative spread of securities is generally small, if leverage effect is not used, private equity funds cannot obtain high returns. Therefore, relative value funds tend to use high leverage. The most famous relative value fund is Long Term Capital Management Corporation (LTCM) in the United States. Due to the highly leveraged operation of LTCM, the company ended up with investment failure in just five years (LTCM was established in 1993,/kloc-0 officially started operation in February/994, and 1998 investment completely failed).
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