Hedge funds minimal risk


Example 1. On the spot market, FOREX you bought USDCHF amounting to 1.25 million Swiss francs and then hedged (open in a different way) this position ten buying futures contracts on the Swiss franc. You can hedge open positions in the spot market opening another, the opposite position in the same market. This is done more often to reduce the risk or immunization (Immunize) an open position against unfavorable changes in the variable on which the trader is not going to make a bet.

Example 2. Anticipating growth rate yield curve Tbonds, trader buys 3-year Notes and immediately sells 30-year Bonds. In this case, the bet is placed on the growth of long-term bonds relative to short-term.

In this situation, a short position on T-bonds is hedged long positions in T-notes. This step is almost removed dependency on various changes volatility of the bond market (all trade is based on a spread in yields T-bonds and T-notes).

In Western Europe - How managed investment boom of hedge funds have a relatively long history. The first hedge fund was established by the founding of the journal Fortune Magazine Alfred Jones (Alfred Winslow Jones) in 1949 (at the time the fund been buying and selling shares on the stock market).

Twenty years later, George Soros has created the world famous hedge fund Quantum Fund (now known as the Quantum Endowment Fund). Famed funds can also be termed funds Shteynharda Michael (Michael Steinhardt) - Steinhardt Partners - and Julian Robertson (Julian Robertson) - Tiger Fund.

After 1972, when the term derivatives markets have become part of the financial market instruments, hedge funds have been actively trading in all segments of the financial market, seeking to maximize profits while dramatically reducing risk. At the time, the services of such funds in the U.S. market could really take advantage of investors with a market capitalization at least $ 1 million to small private investors doors of hedge funds were closed.

Due to the liberalization of the American and European legislation, customers are now able to hedge funds and investors become less. However, the main customers fund - institutional investors. In the last ten years, the growth of this type of assets managed fund has averaged 25% per year. Roughly the same proportion increased and the number of hedge funds. The number of active hedge funds close to seven thousand. According to Morningstar Inc., Their total capitalization well above $ 600 billion.

It is known that during the periods when the stock market is dominated by bears, many investors get rid of falling costs of assets. In order not to lose its customer base and attract new prospective investors, various brokerage firms, banks and other financial institutions have begun to actively introduce new tools and ways of investing. In the first half of 2001, one of the most effective investment tool steel products and services offered by hedge funds.

In Western Europe, hedge industry is experiencing a boom in the first half of 2001 cumulative capitalization of European hedge funds increased by 60% (according to www.k2kapital.com). There is an explanation for the last year and a half allowed the hedge funds to preserve capital during the bearish trend for most segments of the financial market. Their superiority over conventional mutual funds was evident during the tragic events of September 11. Financial results of the hedge funds were much better, even compared with the stock indices, the S & P and DJI (which, in fact, provided a subsequent increase in the number of contributors). Alternatively, the possible content and structure of the hedge fund portfolio is an example that allows a better understanding of the methods and techniques selection of appropriate financial instruments the fund managers.