In fact, hedge funds are really not that mysterious. When my grandmother used the "hedging strategy" to cook, hedge funds were not yet born (the first hedge fund appeared in the 1950s). Here are a few examples, you will find that hedging strategy has always been contained in our wisdom of life:
Principle of removing fishy smell with vinegar: Fish has a fresh taste, but it has a fishy smell. Odor is caused by alkaline substances such as amines; Vinegar contains acetic acid, which can neutralize amines and remove fishy smell, leaving only umami flavor.
Principle of running to lose weight: We love to eat delicious food, but delicious food contains a lot of calories, which can be accumulated into fat. Running can make fat cells release a large number of non-esterified fatty acids, thus making fat cells thinner and thinner, achieving the effect of losing weight, so that they can enjoy delicious food with confidence.
Yang Changji's principle of threshing millet: We want the grain, but the husk has tightly wrapped the grain. When millet is threshed by Yang Changji, the grains can be separated from the chaff, leaving only full grains.
There are countless similar cases. Although we don't understand finance, we know the concept of hedging: if A contains something we don't want, we can wash it out through the-β pair in B and get α with peace of mind.
So how do real hedge funds work? Take Warburg Quantitative Hedge Fund as an example, it hedges the systemic risk of the market by shorting stock index futures, thus obtaining absolute returns.
Specifically, the absolute return is mainly achieved through the following two steps:
1. Establish a stock portfolio with earnings exceeding the market. In this regard, Warburg is experienced in quantifying hedge funds. After careful research and development and continuous verification, the quantitative team of Huabao Industrial Fund has established two models: the quantitative industry allocation model and the quantitative α stock selection model to select high-quality stocks from the perspective of industries and individual stocks, and adjust individual stocks in time to ensure that the stock portfolio outperforms the market.
2. Hedge market systemic risks by shorting stock index futures. Because the stock portfolio selected by the fund can outperform the market, in theory, when the market rises, the stock portfolio will earn more, while the stock index futures will lose less and eventually make a profit; When the market falls, because the loss of the stock portfolio is small and the stock index futures are profitable, it is still profitable. So no matter what the market is, as long as the portfolio plays the role of excess returns, hedge funds can get absolute returns.
There used to be a story. Two people met a wild animal in the forest. One of them said, Stop running, it's no use running. The other said, if I run past you, I can live. The reason is the same. Before hedging instruments, if the market falls all the way, no one will be spared. But with hedging tools, the situation is different.
First, not afraid of the market bear cattle, the pursuit of absolute returns. Warburg Quantitative Hedge Fund adopts a market-neutral strategy and hedges risks on the principle of complete hedging, which has low correlation with the stock market and bond market. Since the establishment of 20 14.9, Huabao quantitative hedge hybrid fund has successfully gone through three deep adjustments in the stock market: during the sharp adjustment of A shares in late October, late April and mid-June this year, it was a smooth hedge, and the net value of the previous period increased by more than 5 percentage points over the Shanghai Composite Index.
Second, the team has rich experience and excellent operational performance. Huabao Xingye is the first batch hedge account manager in the domestic fund industry, with more than 9 years of active quantitative strategy research experience. It issued the first quantitative hedging account product on 20 1 1, and then issued five quantitative hedging accounts one after another, and established Warburg Quantitative Hedging Public Offering of Fund on September 20 14, which has been maintained continuously for 65,438 years.