Hedge Funds For Dummies

Ann C. Logue (Autor)

Buch | Softcover

360 Seiten

2006
For Dummies (Verlag)
978-0-470-04927-3 (ISBN)

Infos

If you want to diversify your portfolio and lower your risk exposure with hedge funds, here’s what you should know: Hedge Funds For Dummies explains all the different types of funds, explores the pros and cons of funds as an investment, shows you how to find a good broker, and much more. Authored by Ann Logue, a financial writer and hedge fund specialist, this handy, friendly guide covers all the bases for investors of all levels. Whether you’re just building your first portfolio or you’ve been investing for years, you’ll find everything you need to know inside:



What a hedge fund is and what it does
How hedge funds are structured
Determining whether a hedge fund is right for your portfolio
Calculating investment risk and return
Short- and long-term tax issues
Developing a hedge fund investment strategy
Monitoring and profiting on macroeconomic trends
Evaluating fund performance
Evaluating hedge fund management

If you’re investing for the future, you definitely want to minimize your risk and maximize your returns. A balanced portfolio with hedge funds is one of the best ways to achieve that sort of balance. This book walks you step by step through the process of evaluating and choosing funds, incorporating them into your portfolio in the right amounts, and making sure they give you the returns you expect and deserve. You’ll learn all the ins and outs of funds, including:



What kind of fees you should expect to pay
Picking a hedge fund advisor or broker
Fulfilling paperwork and purchasing requirements
Performing technical analysis and reading the data
How to withdraw funds and handle the taxes
Tracking fund performance yourself or through reporting services
Hedge fund strategies for smaller portfolios
Performing due diligence on funds that interest you

This friendly, to-the-point resource includes information you can’t do without, including sample portfolios that show you how to invest wisely. Hedge funds are an important part of every balanced portfolio, and this friendly guide tells how to use them to your best advantage. With important resources, vital information, and commonsense advice, Hedge Funds For Dummies is the perfect resource for every investor interested in hedge funds.

Autor

Ann C. Logue, MBA, is a financial writer who has written extensively on investing and hedge funds.

Inhalt

Introduction 1

Part I: What Is a Hedge Fund, Anyway? 7

Chapter 1: What People Talk About When They Talk About Hedge Funds 9

Defining Hedge Funds (Or Should I Say Explaining Hedge Funds?) 10

Hedging: The heart of the hedge-fund matter 10

Identifying hedge funds: The long explanation 11

Pledging the secret society: Getting hedge fund information 14

Surveying the History of Hedge Funds 15

Alfred Winslow Jones and the first hedge fund 15

1966 to 1972: Moving from hedging to speculating 16

George Soros, Julian Robertson, and hedge-fund infamy 17

The rise and fall of Long-Term Capital Management 17

The Yale Endowment: Paying institutional attention to hedge funds 18

Generating Alpha 19

Introducing Basic Types of Hedge Funds 20

Absolute-return funds 20

Directional funds 21

Meeting the People in Your Hedge Fund Neighborhood 21

Managers: Hedging for you 21

Lawyers: Following the rules 22

Consultants: Studying funds and advising investors 22

Paying Fees in a Hedge Fund 23

Managing management fees 24

Shelling out your percentage of performance fees 24

Chapter 2: Examining How Hedge Funds Are Structured 27

Exploring the Uneven Relationships between Fund Partners 28

General partners: Controlling the fund 28

Limited partners: Investing in the fund 29

Only Accredited or Qualified Investors Need Apply 30

Which kind of investor are you? 30

Why do hedge fund investors need to be qualified or accredited? 32

Do funds really check up on you? 33

Do I have alternatives if I don’t qualify? 33

Following the Cash Flow within a Hedge Fund 34

Substituting commitments for cash 34

Waiting for withdrawals and distributions 35

Fee, Fi, Fo, Cha Ching! Paying the Fees Associated with Hedge Funds 37

Management fees 38

Sales charges 39

Performance fees 39

Redemption fees 41

Commissions 41

Dealing with the Hedge Fund Manager 42

Making time for meetings 42

Communicating with the written word 42

Seeking Alternatives to Hedge Funds 43

Making mutual funds work for you 45

Profiting from pooled accounts 45

Entering individually managed accounts 45

Chapter 3: Not Just a Sleeping Aid: Analyzing SEC Registration 47

Getting to Know the SEC’s Stance on Registration and Regulation 48

Examining the SEC’s past and current policies on registration 49

Meeting investor needs with regulation 53

Realizing that “registered” doesn’t mean “approved” 53

Addressing registration at the state level 54

Going Costal: Avoiding the Registration Debate through Offshore Funds 55

Investing in a Fund without Registration 56

Contracting the manager’s terms 56

Covering yourself with due diligence 57

Chapter 4: How to Buy into a Hedge Fund 59

Using Consultants and Brokers 60

Marketing to and for Hedge Fund Managers 61

Investor, Come on Down: Pricing Funds 62

Calculating net asset value 63

Valuing illiquid securities 66

Managing side pockets 67

Purchasing Your Stake in the Fund 67

Fulfilling paperwork requirements 68

Working with brokers 68

Reporting to the taxman 69

Signing Your Name on the Bottom Line 69

Drawing up the contract 69

Addressing typical contract provisions 70

Finding room for negotiation 70

Part II: Determining Whether Hedge Funds Are Right for You 71

Chapter 5: Hedging through Research and Asset Selection 73

First Things First: Examining Your Asset Options 74

Sticking to basics: Traditional asset classes 75

Going for some flavor: Alternative assets 78

Custom products and private deals 83

Kicking the Tires: Fundamental Research 85

Top-down analysis 86

Bottom-up analysis 88

Focusing on finances: Accounting research 89

Gnawing on the numbers: Quantitative research 89

Reading the charts: Technical analysis 90

How a Hedge Fund Puts Research Findings to Work 91

The long story: Buying appreciating assets 92

The short story: Selling depreciating assets 93

Chapter 6: Calculating Investment Risk and Return 95

Market Efficiency and You, the Hedge Fund Investor 96

Why efficiency matters 96

Perusing profitable inefficiencies 97

Efficiency and the random walk 97

Using the Modern (Markowitz) Portfolio Theory (MPT) 98

So what’s risky? 99

Reviewing risk types in the MPT 101

Distributing risk 102

Determining the market rate of return 105

Beta: Ranking market return 106

Alpha: Return beyond standard deviation 108

The Arbitrage Pricing Theory (APT): Expanding the MPT 109

Discovering How Interest Rates Affect the Investment Climate 110

Seeing what goes into an interest rate 110

Relating interest rates and hedge funds 112

Witnessing the power of compound interest 113

Investing on the Cutting Edge: Behavioral Finance 116

Examining the principles of behavioral finance 117

Applying behavioral finance to hedge funds 120

Chapter 7: You Want Your Money When? Balancing Time and Liquidity 123

Considering Your Cash Needs 124

Like Dollars through the Hourglass: Determining Your Time Horizon 124

Taking stock of temporary funds 125

Fathoming matched assets and liability 126

Peeking into permanent funds 127

Poring Over Your Principal Needs 128

Handling Liquidity After You Make Your Initial Investment 130

Taking advantage of additional investments 130

Knowing when (and how) you can withdraw funds 131

Receiving distributions 132

Moving on after disbandment 134

Chapter 8: Taxes, Responsibilities, Transparency, and Other Investment Considerations 135

Taxing You, the Hedge Fund Investor (Hey, It’s Better than Death!) 136

Making sense of capital-gains taxes 136

Taxing ordinary income 137

Exercising your right to be exempt 138

Figuring Out Your Fiduciary Responsibility 141

Coming to terms with common law 142

Tackling trust law 143

Uniform Management of Institutional Funds Act (UMIFA) 144

Employee Retirement Income Security Act (ERISA) of 1972 145

Transparency in Hedge Funds: Rare but There 146

Appraising positions 146

Interpreting risk 147

Avoiding window dressing 148

Activists and opponents in the hedge fund world 148

Practicing Socially Responsible Investing 149

Chapter 9: Fitting Hedge Funds into a Portfolio 151

Assaying Asset Allocations 152

Matching goals to money 152

Chasing return versus allocating assets 153

Using Hedge Funds as an Asset Class 154

How hedge funds are assets 154

Diversification, risk, and return: How the asset pros and cons play out 157

Viewing a Hedge Fund as an Overlay 158

Considering the overlay pros and cons 158

Investment reporting: An overlay example 159

Mixing and Matching Your Funds 161

Looking for excess capital under the couch cushions 161

Taking different funds to the dressing room 162

Working without transparency 163

Part III: Setting Up Your Hedge Fund Investment Strategy 165

Chapter 10: Buying Low, Selling High: Using Arbitrage in Hedge Funds 167

Putting Arbitrage to Good Use 168

Understanding arbitrage and market efficiency 169

Factoring transaction costs into arbitrage 170

Pitting true arbitrage versus risk arbitrage 171

Cracking Open the Arbitrageur’s Toolbox 172

Drawing upon derivatives 172

Using leverage 173

Short-selling 173

Synthetic securities 173

Flipping through the Rolodex of Arbitrage Types 174

Capital-structure arbitrage 174

Convertible arbitrage 175

Fixed-income arbitrage 176

Index arbitrage 176

Liquidation arbitrage 177

Merger arbitrage 178

Option arbitrage 179

Pairs trading 179

Scalping 180

Statistical arbitrage 181

Warrant arbitrage 181

Chapter 11: Short-Selling, Leveraging, and Other Equity Strategies 183

Short-Selling versus Leveraging: A Brief Overview 184

Strutting in the Equity Style Show 185

Trying on a large cap 185

Fitting for a small cap 185

Investing according to growth and GARP 186

Swooping in on lowly equities with value investing 187

Keeping options open for special style situations 187

Market Neutrality: Taking the Market out of Hedge-Fund Performance 188

Being beta neutral 189

Establishing dollar neutrality 190

Staying sector neutral 191

Rebalancing a Portfolio 192

Long-Short Funds 195

Making Market Calls 197

Investing with event-driven calls 197

Taking advantage of market timing 198

Putting the Power of Leverage to Use 199

Buying on margin 199

Gaining return with other forms of borrowing 200

Chapter 12: Observing How Hedge Funds Profit from the Corporate Life Cycle 203

Examining the Corporate Structure (And How Hedge Funds Enter the Picture) 204

Observing the relationship between owners and managers 205

Pitting business skills versus investment skills 206

From Ventures to Vultures: Participating in Corporate Life Cycles 207

Identifying venture capital and private equity as hedge-fund investments 208

Project finance: Are hedge funds replacing banks? 209

Gaining return from company mergers and acquisitions 211

Investing in troubled and dying companies with vulture funds 213

Chapter 13: Macro Funds: Looking for Global Trends 217

Fathoming Macroeconomics 218

Focusing on fiscal policy 218

Making moves with monetary policy 219

Taking Special Issues for Macro Funds into Consideration 221

Diversified, yes Riskless, no 222

Global financial expertise 222

Subadvisers 222

The multinational conundrum 222

Widening or Narrowing Your Macro Scope 223

Coming to terms with currencies 224

Contemplating commodities 230

Chapter 14: But Will You Make Money? Evaluating Hedge-Fund Performance 233

Measuring a Hedge Fund’s Risk and Return 234

Reviewing the return 234

Sizing up the risk 239

Benchmarks for Evaluating a Fund’s Risk and Return 242

Looking into indexes 243

Picking over peer rankings 245

Standardizing performance calculation: Global Investment Performance Standards 246

Putting Risk and Return into Context with Academic Measures 247

Sharpe measure 247

Treynor measure 248

Jensen’s alpha 249

The appraisal ratio 249

Serving Yourself with a Reality Check on Hedge-Fund Returns 250

Risk and return tradeoff 250

Survivor bias 251

Performance persistence 251

Style persistence 252

Hiring a Reporting Service to Track Hedge-Fund Performance 252

Greenwich-Van 252

HedgeFund.net 253

Hedge Fund Research 253

Lipper Hedge World 253

Managed Account Report 253

Morningstar 254

Part IV: Special Considerations Regarding Hedge Funds 255

Chapter 15: Hooking Onto Other Types of Hedge Funds 257

Multi-Strategy Funds: Pursuing a Range of Investment Strategies 257

Determining the strategies 258

Dividing in-house responsibilities 259

Scoping the pitfalls of working with a broad portfolio 260

Funds of Funds: Investing in a Variety of Hedge Funds 260

Surveying fund of funds types 261

Highlighting the advantages of funds of funds 262

Acknowledging the problems with funds of funds 263

Multiple funds, multiple fees 264

Advancing to funds of funds of funds (I’m not making this up!) 266

Hedge Funds by Any Other Name 267

Entering Mutual Funds That Hedge 268

Chapter 16: Using Hedge-Fund Strategies without Hedge Funds 271

A Diversified Portfolio Is a Hedged Portfolio 272

A slow-and-steady strategy works over the long run 272

 But some investors want to hit a home run NOW 274

Exploring Your Expanding Asset Universe 275

Rounding up the usual asset alternatives 276

Other assets you may not have considered 278

Structuring a Hedge-Filled Portfolio 279

Recognizing natural hedges 280

Doing the math 281

Utilizing Margin and Leverage in Your Accounts 282

Derivatives for leverage and hedging 283

Short-selling as a hedging and leverage strategy 287

More leverage! Other sources of borrowed funds 288

Hedge Fund Strategies in Mutual Funds 288

Bear funds 289

Long-short mutual funds 289

Mutual fund of funds 290

Chapter 17: Hiring a Consultant to Help You with Hedge Funds 291

Who Consultants Work For 291

What Do Consultants Do (Besides Consult)? 292

Analyzing performance 292

Determining your investment objectives 293

Putting a hedge fund manager under the microscope 294

Optimizing your portfolio 294

Managing a Request for Proposal (RFP) 295

Consultants and funds of funds 295

Hunting for the Hedge-Fund Grail: A Qualified Consultant 296

Following recommendations and referrals 297

Performing another round of due diligence 297

Managing Conflicts of Interest 298

Compensating Consultants for Their Services 299

Hard-dollar consultants 300

Soft-dollar consultants 300

Hedge Funds Pay the Consultants, Too 302

Chapter 18: Doing Due Diligence on a Hedge Fund 303

Why Do Due Diligence? 304

Becoming Your Own Magnum, I.I.: Investment Investigator 305

First things first: Knowing what to ask 306

Interviewing the hedge fund manager 308

Poring over fund literature 309

Picking up the phone 310

Searching Internet databases 311

Seeking help from service providers 312

More assistance with due diligence 313

What Are You Gonna Do When the Hedge Fund Does Due Diligence on YOU! 314

Knowing the Limits of Due Diligence 314

Part V: The Part of Tens 319

Chapter 19: Ten (Plus One) Big Myths about Hedge Funds 321

A Hedge Fund Is Like a Mutual Fund with Better Returns 321

Hedge Funds Are Asset Classes That Should Be in Diversified Portfolios 322

Alpha Is Real and Easy to Find 322

A Fund That Identifies an Exotic and Effective Strategy Is Set Forever 323

Hedge Funds Are Risky 323

Hedge Funds Hedge Risk 324

The Hedge-Fund Industry Is Secretive and Mysterious 324

The Hedge-Fund Industry Loves Exotic Securities 325

Hedge Funds Are Sure-Fire Ways to Make Money 325

Hedge Funds Are Only for the “Big Guys” 326

All Hedge Fund Managers Are Brilliant 326

Chapter 20: Ten Good Reasons to Invest in a Hedge Fund 327

Helping You Reduce Risk 327

Helping You Weather Market Conditions 328

Increasing Your Total Diversification 328

Increasing Your Absolute Return 329

Increasing Returns for Tax-Exempt Investors 329

Helping Smooth Out Returns 330

Giving You Access to Broad Asset Categories 330

Exploiting Market Inefficiencies Quickly 331

Fund Managers Tend to Be the Savviest Investors on the Street 331

Incentives for Hedge Fund Managers Are Aligned with Your Needs 332

Index 333

Produkt-Details

• Erscheint lt. Verlag: 31.10.2006
• Sprache: englisch
• Maße: 185 x 234 mm
• Gewicht: 476 g
• Themenwelt: Sachbuch/Ratgeber ► Beruf / Finanzen / Recht / Wirtschaft ► Geld / Bank / Börse
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Finanzierung
• ISBN-10: 0-470-04927-8 / 0470049278
• ISBN-13: 978-0-470-04927-3 / 9780470049273
• Zustand: Neuware