.Praise for Hedge Fund of Funds Investing: An Investor’s Guide
by Joseph G. Nicholas
“Hedge funds of funds are at the leading edge of the broad move into hedge investing by the mainstream of private wealth management.
CHAPTER 9 The Time Is Now for Equity Market Neutral. As is the case with convertible arbitrage and fixed-income hedge fund investing, equity market neutral is characterized as a relative value strategy. However, it is not pure arbitrage; this strategy generally trades on the differences in value across a wider range of less closely related securities
The purpose of this booklet is to provide an introduction to
some of the basic equity option strategies available to option
and/or stock investors. Exchange-traded options have
many benefits including flexibility, leverage, limited risk for
buyers employing these strategies, and contract performance
guaranteed by The Options Clearing Corporation (OCC).
Options allow you to participate in price movements without
committing the large amount of funds needed to buy
Equity and fixed income funds play an important role for the impressive Thai mutual fund
growth. With an in depth analysis, we found two major facts. Firstly, Thai mutual fund industry is
concentrated in fixed income mutual funds especially short-term money market funds. Secondly,
approximately 50% of the AUM invested in Thai equity mutual funds are from LTF and RMF or
growth in equity mutual funds is affected by tax incentive.
The analysis in this paper suggests that hedge funds play a
very positive role in financial markets by providing liquidity to
thin markets where mis-priced financial instruments are to be
found. This type of activity reduces volatility rather than
Indeed with the rapid growth of structured products in
recent years, particularly in Europe and Asia, hedge funds
have been quite critical in containing the volatility that might
otherwise have arisen.
A summary of the different styles of hedge funds and
the proportion of the market they occupy is shown in Table
4, based on Hedge Fund Industry Research data. An
indication of the broad activity involved in the style is
shown on the right hand side. Most of these strategies are
long-short in nature: all of the equity hedge (e.g. long a
stock and long a put to hedge its fall); most of event driven
(e.g. buy the target M&A company and sell the buyer); all of
relative value arbitrage (e.g. buy the London listing and sell
Contracts tend to use a single earnings number that is either the reported earnings or a transformation of reported earnings. For example, private debt contracts use reported earnings with some GAAP measurement rules "undone" (e.g., equity accounting for subsidiaries -see Leftwich, 1983, p. 25). And, CEO bonus plans use earnings (or transformations of earnings such as returns on invested capital) to determine 80% of CEO bonuses (Hay, 1991; Holthausen, Larcker and Sloan, 1995).
Economic access includes both the use of productive land and
other natural resources to directly produce food and to gener-
ate income as well as functioning distribution, processing and
market systems that can move food from the site of production
to where it is demanded. Thus, the existing ability to individually
or communally cultivate land (on the basis of ownership or other
form of tenure) must be protected.
Other Comprehensive Income
Statement of Financial Accounting Standards No. 130 Comprehensive income includes traditional net income and changes in equity from nonowner transactions.
1. Changes in the market value of securities available for sale (described in Chapter 12). 2. Gains, losses, and amendment costs for pensions and other postretirement plans (described in Chapter 17). 3. When a derivative is designated as a cash flow hedge is adjusted to fair value, the gain or loss is deferred as a component of comprehensive income and included in...
Bond Funds, which account for €320.7 billion of shares/units in issue, and are therefore the
largest fund category, experienced minor positive revaluations of €1.7 billion, but mostly
benefitted from increased confidence in bonds by recording significant new investment of
€12 billion, the highest relative inflow of any category.
Hedge Funds, which account for €73.2 billion of shares/units in issue, also benefitted from
positive revaluations and net inflows. Revaluations at €3 billion, or 4.
In addition, the Volcker Rule does not apply to Banking Entity’s investing in or sponsoring hedge funds
or private equity funds that occur solely outside the United States as long as (i) no ownership interest
in such funds is offered to U.S. residents, and (ii) the Banking Entity is not directly or indirectly
controlled by another Banking Entity that is organized under the laws of the United States or a U.S.
Under the Act, the Federal banking agencies, the SEC, the CFTC and the Board of Governors of the
Federal Reserve System (the “Fed”) will coordinate to...
Section 619 of Dodd-Frank (the “Volcker Rule”)
generally prohibits any banking entity, including afﬁ liates
of banks, from the following (all of which are subject to
a number of exceptions): (i) engaging in, sponsoring or
investing in a “covered fund” (e.g., a hedge fund, pri-
vate equity fund, and numerous other private funds and
pooled investment vehicles), and (ii) having certain rela-
tionships with a covered fund.
Voted by the European Parliament in November 2010, the AIFM Directive covers all alternative sectors such as hedge funds, real estate and private equity, as well as traditional sectors where the fund products are not registered as UCITS.1
AIF products are generally reserved for professional investors, but may also be marketed to retail investors. Today, investors access alternative investment products primarily through national private placement channels; for European investors and products, the AIFM marketing regime will replace these.
Hedge Funds have grown quickly over the past ten years,
and are important part of the financial landscape. They are
difficult to define as entities, because the line between what
hedge funds do that other institutions do not is blurred –
proprietary traders in investment banks, private equity funds,
and fund managers all use extensive leverage and derivatives
to trade markets or to shift risks.
The main differences between a hedge fund and a private
equity fund are: (a) the private equity fund looks to use
leverage to buy companies to obtain full management control
for purposes of changing its structure operations, whereas a
hedge fund trades assets without looking for full control; (b)
the hedge fund covers a multitude of styles, only one small part
of which might involve buying shares to force management to
make value enhancing changes (activist); and (c) hedge funds
often (but not always) have a shorter investment horizon than
private equity firms.
In the EU, investment funds can be broadly categorised as UCITS (undertakings for collective
investment in transferable securities) and non-UCITS (or non-harmonised) funds.
funds are those that comply with harmonised rules as laid down in the UCITS Directive
(85/611/EEC) and are authorised for sale to the retail market.
Non-harmonised funds (hereafter referred to collectively as alternative investment funds, or
AIF) do not form a homogenous class of investment fund.
AIF invest in a wide variety of
asset types and employ very different investment strategies.
The papers of Long and Merton suggested interest rates and inﬂa-
tion as risk factors, but their models did not fully specify what all the
hedge portfolios should be, or how many there should be. The APT
speciﬁes the factors only in a loose statistical sense. This leaves it up to
empirical research to identify the risk factors or hedge portfolios. Chen
et al. (1986) empirically evaluated several likely economic factors, and
Chen et al. (1987) used these in an evaluation of equity mutual funds.
Available-for-sale securities. Investments in debt securities that are classified as available for sale
and equity securities that have readily determinable fair values that are classified as available for
sale shall be measured subsequently at fair value in the statement of financial position.
Unrealized holding gains and losses for available-for-sale securities (including those classified as
current assets) shall be excluded from earnings and reported in other comprehensive income until
realized except as indicated in the following sentence.