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Hedge Fund Investing. Mirabile Kevin R.
Читать онлайн.Название Hedge Fund Investing
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isbn 9781119210375
Автор произведения Mirabile Kevin R.
Жанр Зарубежная образовательная литература
Издательство Автор
The global mutual fund industry initially peaked at 641 organizations and $24.6 trillion at the end of 2007, according to data compiled by Tiburon Strategic Advisors, LLC. The number of managers and the assets under management declined dramatically in 2008, as asset values fell across the board and many funds experienced significant redemptions and liquidations. The industry has since recovered and is expected to continue to grow in the future. According to data from the International Investment Funds Association shown in Figure 1.3, global mutual fund and unit trust assets under management at the end of 2014 were $31.4 trillion. The industry is still composed of a large number of smaller firms, on the one hand, and a handful of dominant players managing the majority of assets on the other. Today, a few large firms dominate the mutual fund field. The U.S. mutual fund industry comprises approximately 50 percent of global assets under management.
FIGURE 1.3 Size of the U.S. and Global Mutual Fund Industry
Source: The International Investment Funds Association.
Size and Scope of the Hedge Fund Industry
The global hedge fund industry initially peaked at about 10,000 organizations and $2.4 trillion in assets under management at the end of 2007, including both hedge funds and funds of hedge fund managers. The number of managers and the assets under management declined dramatically in 2008 as asset values fell across the board and many funds experienced significant redemptions and liquidations. The industry has since recovered all of its lost assets and now manages approximately $3 trillion.
The number of hedge funds and funds of hedge funds has grown more slowly and today remains only slightly above the peak of 2007. This is due to a large number of funds being forced to close in 2008 and 2009 and the fact that fewer new hedge funds per year launched between 2010 and 2015 than at the peak of the market.
Today, the industry is characterized by many small firms with low levels of assets under management, on the one hand and, on the other hand, by a small number of very large firms with significant assets under management and a very large percentage of aggregate industry assets. According to Hedge Fund Research, approximately 52 percent of all hedge funds manage less than $100 million. However, the largest funds, with assets greater than $1 billion, manage almost 90 percent of all investor assets.
Figure 1.4 shows the number of hedge funds and funds of hedge fund managers from 1990 to Q1 2015. Figure 1.5 shows the growth in assets and the net asset flows from 1990 to Q1 2015 into the hedge fund industry, and Figure 1.6 shows the distribution of hedge fund assets by tier at the end of Q1 2015.
FIGURE 1.4 Estimated Number of Hedge Fund and Fund of Hedge Fund Managers, 1990 through Q1 2015
Source: HFR Industry Reports © HFR, Inc. 2015, www.hedgefundresearch.com.
FIGURE 1.5 Estimated Growth of Assets/Net Asset Flow Hedge Fund Industry, 1990 through Q1 2015
Source: HFR Industry Reports © HFR, Inc. 2015, www.hedgefundresearch.com.
FIGURE 1.6 Distribution of Industry Assets by Fund AUM Tier as of Q1 2015
Source: HFR Industry Reports © HFR, Inc. 2015, www.hedgefundresearch.com.
Mutual funds, pension plans, sovereign wealth funds, endowments and foundations, and individual investors still allocate the majority of their investments in traditional stocks and bonds. Hedge funds investments represent a relatively small percentage of all securities owned by global investors today, although it is growing faster than the rate of growth of allocations to traditional investments.
Despite the relatively small size of assets under management, the influence of hedge funds on stock, bond, currency, and commodity prices, as well as the importance of their research and information flows and fees to Wall Street, continues to grow. Hedge funds now account for a significant amount of the daily volume on the NYSE, according to 2012 statistics compiled by StatSpotting.com:
• High-frequency trading: 56 percent (includes proprietary trading shops, market makers, and high-frequency trading hedge funds)
• Institutional: 17 percent (mutual funds, pensions, asset managers)
• Hedge funds: 15 percent
• Retail: 11 percent
• Other: 1 percent (nonproprietary banking)
This chapter was intended to provide a foundation to facilitate a basic understanding of the nature of alternative investments and hedge funds. It was designed to familiarize readers with the core concepts used to describe and evaluate hedge fund investments. It provides the basis for our future discussions about why people invest in hedge funds and how the various strategies used by hedge funds can be evaluated and differentiated by investors.
CHAPTER 2
Hedge Fund Strategies, Performance Measurement, and Risk
This chapter provides an initial introduction to some of the most common hedge fund strategies. In addition, it will show you how to use monthly returns and the exposure data reported to investors to measure performance and risk and how leverage, short selling, and derivatives impact performance.
It is useful to understand the diversity of styles, strategies, and substrategies that fall under the category of hedge fund investing before delving into any one strategy or fund. It is also important to appreciate that hedge funds can profit from trading in a variety of instruments, using a wide array of financing tools, and using derivatives. Hedge funds typically actively trade individual stocks, bonds, options, or derivative instruments that provide asset class exposure, such as the S&P 500 or interest rates futures and sometimes ETFs. Hedge funds that invest in individual stocks may go either long or short, based on the results of their company-specific research and level of conviction in the ideas or trends supporting each position. A manager who buys IBM and profits from its increase in value can at the same time sell Microsoft short and profit from its fall in value. A manager using this strategy would be relatively insulated from a fall in the overall technology sector and would seek to profit from the relative performance of IBM versus Microsoft in both rising and falling markets. Figure 2.1 shows the changes in prices for IBM, Microsoft, and the Nasdaq Composite over a 12-month period.
FIGURE 2.1 Long and Short Equity Opportunities
Source: Yahoo! Finance.
Some equity-oriented funds may buy or sell stocks and trade options to profit or enhance their particular views on volatility or market direction while investing only a small portion of their capital to take large amounts of risk. Managers using options are attracted to the higher degree of leverage embedded in the product relative to traditional margin loans, borrowing from a bank, or short selling. Long calls can create exposure similar to a purchase in a margin account, and long puts can create exposure similar to a short sale. Options can also be used to buy or sell volatility on the equity market or on individual stocks and bonds, or they can also be written to generate income and enhance performance.
Some funds that are fixed-income–oriented