When talking about hedge fund managers, many people immediately think of this image: a group of great masters who know the capital market and human nature well, holding tens of billions of funds in their hands, like a giant crocodile looking around for investment opportunities, ready to cause a bloody storm at any time.

In fact, hedge funds are really not that mysterious.

When my grandma was cooking with “hedge strategies,” hedge funds hadn’t even been invented yet (the first hedge funds appeared in the 1950s).

Here are a few examples, and you will find that hedging strategies have always been included in our life wisdom: The principle of vinegar to remove fishy smell: fish has a fresh taste, but also a fishy smell.

The fishy smell is caused by alkaline substances such as amines; vinegar contains acetic acid, which can neutralize the amines and remove the fishy smell, leaving only the delicious taste.

Principle of running to lose weight: We love to eat delicious food, but delicious food contains a lot of calories, which can accumulate into fat.

Running can cause fat cells to release a large amount of non-esterified fatty acids, thereby making the fat cells smaller and achieving weight loss, so that you can enjoy delicious food with confidence.

The principle of using winnowing machine to thresh millet: What we want is the grain, but the chaff has always been tightly wrapped around the grain.

Using a winnowing machine to thresh the millet can separate the grains and chaff, leaving only the full grains.

There are countless similar cases. Although we don’t understand finance, we are familiar with the concept of hedging: if A contains something β that we don’t want, we can hedge it through -β in B and obtain α with peace of mind.

So how do real hedge funds operate?

Take Huabao Quantitative Hedge Fund as an example. It hedges market systemic risks by shorting stock index futures, thereby obtaining absolute returns.

Specifically, it mainly achieves absolute returns through the following two steps: 1. Establish a stock portfolio with returns that exceed the market.

Huabao Quantitative Hedge Fund has quite a lot of experience in this regard.

After careful research and development and continuous verification, the quantitative team of Huabao Industrial Fund has established two major models: the quantitative industry allocation model and the quantitative α stock selection model. They select high-quality stocks from the perspectives of industries and individual stocks respectively, and adjust individual stocks in a timely manner to ensure that the stock portfolio beats the market.

.

2. Hedging market systemic risks by shorting stock index futures.

Because the stock portfolio selected by the fund can beat the market, in theory: when the market rises, the stock portfolio makes more profits, while the stock index futures lose less, and ultimately makes a profit; when the market falls, because the stock portfolio loses less, and the stock index futures make more profits

, and still make a profit in the end.

Therefore, no matter what the market is like, as long as the portfolio plays the role of excess returns, hedge funds can obtain absolute returns.

There was a story in the past that two people encountered a wild beast in the forest. One of them said, "Don't run away. There's no point in running."

But the other said, I can live if I outrun you.

The principle is the same. Before there were hedging tools, if the market fell all the way, no one would be spared.

But with hedging tools, the situation is different.

First, it is not afraid of bearish or bullish markets and pursues absolute returns. Huabao Quantitative Hedge Fund adopts a market-neutral strategy and uses complete hedging as its principle to hedge risks. Its correlation with the stock market and bond market is very low.

Since its establishment in September 2014, Huabao Quantitative Hedge Hybrid Fund has successfully gone through three deep corrections in the stock market: during the substantial corrections in A-shares in late January, late April, and mid-June this year, it has steadily averted risks, and its net worth has exceeded the Shanghai Stock Index every time.

More than 5 percentage points.

Second, the team has rich experience and excellent operating performance. Huabao Xingye is one of the first batch of quantitative hedging account managers in the domestic fund industry. It has more than 9 years of active quantitative strategy research experience. In 2011, it issued its first quantitative hedging account product.

After that, 5 issues of quantitative hedging special accounts were successively issued, and in September 2014, the Huabao Quantitative Hedging Public Fund was established. So far, it has maintained positive monthly returns for 10 consecutive months.