in assets as of Jan. 1, 2007. Globally, assets
under management is as high as $2 trillion. Hedge funds have grown to the
point where they are considered one of the biggest players in nearly every
marketstocks, bonds, commodities and derivatives.
Hedge funds are considered an alternative investment vehicle.
alternative investment is the general term under which unregulated funds
operate; this includes private equity and real estate funds. The total
alternative category (which would include private equity and real estate) is
not covered within the scope of this book but it is useful to know that often
people refer to hedge funds as an alternative investment.
are investment funds that everyday investors can purchase; mutual funds are
Since the early 1990s, hedge funds have grown tremendously, not only in
terms of assets under management, but also in the amount of media attention
theyve garnered for their brash strategies and the massive returns many have
generated. Although they may remain a mystery to the general public, their
effect on the global marketplace is felt more strongly with each passing day.
Hedge fund managers are constantly trying to find new ways to take
advantage of the markets inefficiencies in order to generate absolute
returnsposting returns in the black each year, no matter what the overall
market does. During the bull market that started in late 2002, thats been
pretty simplewhen stocks around the world are surging, its relatively easy
to make money. But in the coming years, hedge funds will be sorely tested as
the markets settle down after a four-year run and absolute returns are more
In this chapter, we will explore what it means to be a hedge fund in these
changing times, as fund managers try not only to continue generating outsized
returns, but also go back to the core purpose of hedge fundsto hedge
insider firm profiles, message boards, the Vault Finance Job Board and more.
During the early years of the hedge fund industry (1950s1970s), the term
hedge fund was used to describe the hedging strategy used by managers
at the time. Hedging refers to the hedge fund manager making additional
trades in an attempt to counterbalance any risk involved with the existing
positions in the portfolio. Hedging can be accomplished in many different
ways but the most basic technique is to purchase a long position and a
secondary short position in a similar security (see the Gap stores example on
page 9). This is used to offset price fluctuations and is an effective way of
neutralizing the effects of market conditions.
and private placement and establishing a base in the southeastern region we
Career Guide to Middle Market Investment Banking (1)
Career Guide to Venture Capital%2C 4th Edition
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