Hedge fund
Hedge funds (english hedge funds, " hedge " of English to hedge [ hɛdʒ ]; rarely SAIV - sophisticated alternative investment vehicle, engl about for sophisticated / demanding alternative investment vehicles. ) Are unregulated or poorly regulated investment funds that are actively managed. They pursue diverse investment strategies and can implement them with a wide range of financial instruments, including derivatives and short selling. So should be possible to achieve even with falling prices above average returns. Hedge funds are advertised with the claim, though to have a very high risk of loss, but the chance of very high returns to offer.
Regardless of its name, which indicates risk hedging strategies ( hedging), hedge funds are due to the high leverage of derivative products to be extremely risky form of investment. Hedge funds seek mostly by external financing to generate a higher return on equity ( leverage or leverage effect).
Most hedge funds are based in offshore financial centers. At the end of 2006, hedge funds had a volume of around 1.6 trillion U.S. dollars worldwide. Well-known hedge funds are the Quantum Fund investment banker George Soros and the fund Long - Term Capital Management, in 1998 but collapsed.
The U.S. Financial warns investors before that there are already some fraud at hedge funds were, some pyramid schemes, and recommends that a thorough examination before investments in hedge funds. The U.S. financial author Larry Swedroe points out that the return of hedge funds by cost is not higher on average than that of bonds, at a much greater risk, and that hedge funds often use dubious means. He classifies hedge fund among the alternative financial products on the third of four stages, but has since expressed doubts as to whether this was not gracious.
- 7.1 Regulation in the U.S.
- 7.2 Regulation in the United Kingdom
- 7.3 Regulation in Liechtenstein
- 8.1 Hedge Funds in 2011
- 8.2 Hedge Funds 2008
- 8.3 Fund of Funds 2005
Origin
The first hedge fund was founded by Alfred Winslow Jones in 1949. Jones sold empty shares to them at a lower price level to purchase later. With the proceeds of the short sale, he bought other shares in the expectation that the shares increase in price. He was simultaneously inventing the first strategy for hedge funds ( long-short ). Fulfilled the expectation that the price of the shares purchased is relatively better (or less negative) developed than the price of the shares sold short, a gain results regardless of whether the overall market, represented by a broad stock market index rises or falls. This is also a key motive of investors in hedge funds is clear. You want to generate a high yield regardless of the recurrent ups and downs of the stock markets. For the long-short strategy, it is necessary to find stocks that fall within a certain time horizon in the price and to identify other stocks that are rising in this period. Thus, the hedge fund manager must assess both the price development of selected shares properly as choose a convenient time for these transactions. According use of hedge fund managers, among others in addition to the traditional corporate rating (assessment of Über-/Unterbewertung of shares) and quantitative - mathematical methods and technical analysis.
Traditional hedge funds were never mutual funds, as the term is understood in Germany according to the Investment Act; even today they are primarily launched for institutional investors.
Hedge fund market
Developments
The sector of hedge funds was in the last years of the fastest growing investment products. The number of worldwide active hedge funds, however, can only be estimated, as well as the invested assets in them. End of 2006, approximately $ 1.5 trillion were invested in hedge funds. The investment volume thus rose by over a third compared to last year. The number of funds increased from late 2005 to the end of 2006 by about 5 % to just under 9,000 to.
In March 2009, the data provider Hedge Fund Research (HFR ) announced that a total of 1,471 hedge funds were released worldwide by the financial crisis in 2008 and around 15 % of the total hedge fund market as well as some funds were affected. We know the names here: Drake Management, an asset management of former BlackRock employees and Peloton Partners, owned by former Goldman Sachs bankers. The assets under management in 2008 to be decreased by 37% to $ 1.2 trillion, according to Morgan Stanley.
Legal domicile of the fund
Join the most funds are mainly in an offshore financial center. The reasons for this are a fiscal nature, there are other, but also in the lower restrictions by the respective capital market legislation, in terms of the allowable in the fund financial instruments. In January 2006, 55% of offshore hedge funds were registered. A considerable distance, as an offshore site of the hedge fund industry, the Cayman Islands ( 63% of the offshore fund monies ), followed by the British Virgin Islands ( 13%) and Bermuda ( 11%). In Europe, there are the British Channel Islands or Gibraltar, but also in terms of capital market legislation more liberal states such as Luxembourg, Ireland, Liechtenstein or Monaco, but they take in comparison with the aforementioned American offshore locations with approximately 10% in more modest. The largest onshore place are again the U.S. with 48% of the onshore assets. Often the seat is located in or near New York, as in Delaware. For funds with focus Europe's leading Onshoreplatz Ireland has 7 % of the Onshorefonds.
Fund Manager
The success of a hedge fund is highly dependent on the skill of the fund manager and the mathematical / econometric models used by this, such as the Black- Scholes model. The procedure of the fund manager is like by the high degree of risk and speculation of a bet. The borrowing of funds up to a multiple of equity is usual to increase the return even more ( leverage effect). From fund managers will be expected to participate in the Fund and of any liability personally. In return, the managers are paid very well, it is often spoken of the 2/20 rule. These are understood ( by the fund volume ) and 20% profit sharing 2% administrative fee.
The variety of hedge fund strategies are significantly increased odds, but also given the risk of loss. These strategies determine the tactics of the fund manager, which he speculates on the future rising or falling stock prices. The fund manager has a high degree of freedom regarding the selection of investments.
Physical domicile of the fund manager
The U.S. hedge fund manager remains the leading far -conditioning course: In terms of assets under management Manage U.S. managers 63 % of the market. In 2002, there were, however, still 83%. The largest trading center for hedge funds is New York, where, according to calculations by the International Financial Services in 2006, 36 % of global assets were managed. 2002, there were still 45%. The decrease is mainly due to the improvement of the position of London, which is now the clear number 2 in the hedge fund industry. The proportion of London-based hedge fund manager increased significantly over the same period from 10% to 21%. Europe as a whole came to 24%. Asia's share rose from 5% to 8%.
Another possible configuration of hedge fund activities offer so-called " managed futures " as a specialized hedge fund asset class. The separation of capital ( which remains in direct customer ownership ) and management can be combined advantages of different seats.
Hedge fund strategies
Main article: Hedge fund strategy
Hedge funds should in theory the assets at risk through hedging (English: to hedge fence in =, fence ) to protect it, but have little to do in its current form with protection.
The first hedge fund strategy ( market neutral strategy ) was by Alfred Winslow Jones ( 1900-1989 ) and should be a tool to protect against adversity in interest and exchange rate risks to be. Jones idea was not only to profit in boom periods on interest rate and currency markets, but to generate profits and falling interest rates and exchange rates. Thus, Jones founded one of the first hedge fund strategies, namely, borrowing ( leverage, margin trading ) and short selling ( short selling ) for the purchase and sale of currencies take. He sold borrowed shares and speculated to be able to buy them back cheaper before the end of the loan period.
New strategies ( global macro strategy ) were developed by George Soros and Jim Rogers with their Quantum Funds of hedge funds. By new financial instruments they speculated in new areas, such as the foreign exchange market, interest rates, commodity and equity markets.
Since the first hedge fund strategy of Jones hedge fund strategies are constantly evolving and have increased significantly. Hedge funds are among the " alternative investments " as an alternative form of investment. Hedge funds use the variety of trading products and trading strategies. Hedge funds, unlike mutual funds, investing heavily in derivatives. Hedge funds use, among others, to a large extent combinations of buy ( long position ) and intent to sell ( short selling ) and leverage. By borrowing creates a " multiplier effect" ( leverage effect). Debt is included because it is expected that the return on an investment can be increased. The functioning of the leverage effect is based on a lower interest rate debt as the profit of the expected return. The leverage effect can be built only through the issuance of debt except by backing a fraction of the exposure in exchange-traded futures contracts (futures), with other hedge fund strategies. A little leverage is offset by a high volume of the traded underlying asset (underlying). A high use of debt, high leverage is common in market neutral arbitrage and global macro strategies.
Hedge funds are now independent investment instruments with very different strategies and risk profiles. All have in common is the claim to make profits in both rising and falling markets. Hedge fund managers are focusing on a range of investment styles and techniques, including financial derivatives, short selling of securities or arbitrage techniques.
As offshore projects, hedge funds are less regulated and their investment decisions less observable, which may tempt that fund managers manipulate the rates of return indicated. Bollen and Pool ( 2009), this hypothesis statistically analyzed and shown that the fund managers can reduce losses in the valuation of illiquid investments in particular, even if the gains are only very weakly. This is consistent with Kahneman and Tversky alleged by stronger investor risk aversion.
The investor, this type of manipulation by " Managed Futures", a specialized hedge fund asset class deal. In this asset class listed securities are traded directly in the customer's account and evaluated by the broker / clearing the site of the customer in real time.
Hedge Funds in Germany
In Germany in 2004 hedge funds were generally not admitted to public trading by the year. A relaxation was performed with the Investment Modernisation Act, which entered into force on 1 January 2004 and now allows the distribution of " funds with additional risks " under certain conditions. These do not have much in common with the large international hedge funds; they belong to the group of investment funds and investment instruments. You may use the instruments of the short sale ( short selling ) and the use of debt ( leverage effect). Units of such funds may not be publicly distributed in Germany, but only in the context of so-called private placement, approximately for deposits from institutional investors.
In contrast, the contribution in the fund of hedge funds for private investors is allowed since 2004. The provider of a fund of hedge funds needs similar to those attaching to its prospectuses warnings on cigarette packages: " The Federal Finance Minister warns: This investment fund, investors must be prepared and able to sustain losses of the capital invested up to a total loss " The investment industry has so far only made in very limited use of the possibility to launch hedge funds in Germany. End of 2011, 25 hedge funds were registered in Germany according to the German Federal Government. However, the market for certificates has grown substantially to foreign hedge funds ( see chart).
German Hedge funds are subject to the supervision of the Federal Financial Supervisory Authority ( BaFin), their debt - use is limited. It therefore is more of mutual funds with greater freedoms than to hedge funds in the original sense.
Hedge Funds in other countries
Anglo-Saxon hedge funds, companies and correspond in some ways more like a closed-end fund. Investors buy shares in these companies. Here, the legal form corresponds mostly of a German KG ( limited partnerships, LP, or limited liability partnership, LLP ) or a GmbH (limited liability company ). There are in the LLP one or more hedge fund managers who are liable with their personal and business assets, and investors who buy shares in these companies. Often, the official residence of such a hedge fund is a tax haven (75% in the Cayman Islands), and the manager sits in a financial center ( as London, New York).
EU draft regulation on hedge funds
In October 2010, the EU finance ministers agreed on stricter rules for regulation of hedge funds and private equity companies.
Regulatory initiatives of the G8 and G -20 countries to hedge funds
At the meeting of G7 finance ministers in Essen in February 2007, they agreed on a joint statement after you want to control hedge funds in the future in more detail. The aim of the G -7 is to identify potential risks arising from the hedge fund activities and thus to prevent global financial crises and contagion effects in fund failures. In conversation are loud agency details, a voluntary code of conduct and a kind of seal of approval for the Fund by independent rating agencies.
At the G8 Summit ( G7 countries and Russia) in June 2007 in Heiligendamm, however, no proposals have been made regarding a target commitment of the industry. The resistance against this came from the United States and Britain, the countries from which operates the majority of the funds. However, the participating leaders exhorted the hedge fund industry to improve the rules of conduct for managers themselves and reaffirmed the same again with the already identified by the finance topics.
At the meeting of leading representatives of the G -20 countries ( plus the Netherlands and Spain) in Washington on 15 November 2008 adopted a stronger regulation of speculative hedge funds.
On 14 March 2009, the finance ministers of the G -20 countries in Horsham agreed to introduce a registration requirement for funds and is planned to control the world's 100 largest hedge funds. Investors are hereby grant of U.S. regulators Securities and Exchange Commission (SEC) or the Financial Services Authority (FSA) insight into their balance sheets.
Regulation in the U.S.
The U.S. Securities and Exchange Commission regulates hedge funds in the U.S.. To this end, it has adopted rules for the borrowing of funds and short selling. Because of regulations, many hedge funds do not register, so they are not approved for public distribution. However, access is for registered with the SEC "qualified " investors (qualification for registration: more than $ 200,000 annual income and more than $ 1 million in private net assets ) is possible. Every hedge fund that trades under the name " Limited Partnership LP" is limited to 499 "partner". The SEC has adopted in the course of 2004 rules for hedge funds that manage more than $ 25 million and are open to new investors. Application, see the rules since February 1, 2006 ( the rules are under links / authorities linked ).
After missing so far publication requirements, look under the pressure of competition American hedge funds to build trust in other ways, for example, with certification to ISO 9000 as the GAM Multi-Manager Hedge Fund has done.
On 13 November 2008 Manager of the five largest hedge funds were summoned before a congressional committee; this is to find out whether hedge funds pose a risk to the financial system. George Soros, Philip Falcone, John Paulson, James Simons and Kenneth Griffin were heard as witnesses for the hedge fund industry. You have agreed to tighter control and the closure of disproportionate tax loopholes.
Regulation in the UK
In the UK, subject to the managers of hedge funds, the authority of the Financial Services Authority, the British counterpart to the BaFin.
Regulation in Liechtenstein
In Liechtenstein, the regulation of hedge funds by the FMA Financial Market Authority Liechtenstein done.
The largest hedge funds and funds of
There are a number of providers of hedge fund databases. The market leaders are BarclayHedge, IASG Managed Futures and EU in Europe.
Hedge Funds in 2011
Hedge Funds in 2008
Fund of Funds 2005
The largest fund of funds (german global fund of hedge funds or fund of funds short ) in 2005 were: