What are Hedge Funds: When Alfred Jones created the first hedge fund in 1949, little did he know what …

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What are Hedge Funds:

When Alfred Jones created the first hedge fund in 1949, little did he know what he was setting in motion. Hedge funds have been somewhat controversial throughout their history, but these funds represent (for good or ill) a high-water mark in market investing. Supporters see them as the epitome of intelligent investment, with highly skilled managers scouring different markets for exceptional returns. By restricting investment to institutional investors or HWNIs, hedge funds have historically been largely unencumbered by "obstructive" legislation.

Detractors see the very freedom that has enabled the different strategies as potentially dangerous to the overall health of the financial system. As major funds leverage their views, they become powerful players in the financial markets − so much so that critics argue that their influence is excessive.

The actions of hedge funds have been blamed for excessive volatility in price levels and subsequent market dislocations. The 1998 demise of LTCM − the most documented hedge fund failure − generated fears of significant disruption to the global financial system, and forced the US Federal Reserve to intervene. While hedge fund failures are commonplace, it's the potential systemic risk arising from the demise of a large fund such as LTCM that strikes fear into the hearts of regulators. Recent regulations such as the Dodd-Frank Act in the US and the AIFM Directive in Europe aim to ensure that hedge funds (and PE firms) cannot threaten the global financial system.

Why it is important:

Creating and marketing hedge funds, and investing in them, is perhaps one of the least understood areas of asset management. While this lack of understanding stems largely from hedge funds' renowned lack of transparency, it's also due to their very different focus compared with more “traditional” investments such as mutual funds. Hedge funds aim to outperform by generating returns that are not directly linked to market performance (beta). This element of outperformance is attributable to the skill of the fund managers and their investment strategies (alpha).

But, as this course will show, all hedge funds are different. Their limited ownership and investment structure allow enormous freedom in investment philosophy and trading strategies. It's important to have a comprehensive and accurate understanding not only of the various strategies but also of the hedge fund industry as a whole and the considerations facing any potential investors.

What will you learn:

  1. Assess the risk profile of a fund’s structure, investment strategy, leverage, and liquidity
  2. Understand financial criteria to benchmark the performance and risk profile of a fund or hedge fund
  3. Identify key macroeconomic and market drivers in the fund's sector and relevant current and proposed regulation
  4. Identify the due diligence considerations for evaluating a fund manager
  5. Early warning signals of hedge fund manager problems
  6. Evaluate the structural risks of exposures to funds

Target audience:

Recruits to banks and asset management firms, portfolio and money managers, private banking/wealth management executives and client relationship managers, financial advisors, institutional and individual investors, support staff requiring an understanding of the business they support.

Curriculum:

  1. Hedge Funds Basics
  2. Hedge Funds Characteristics
  3. Hedge Funds Market Players
  4. Hedge Funds Performance
  5. Hedge Funds Risks (Part 1)
  6. Hedge Funds Risks (Part 2)
  7. Hedge Funds Investor Considerations (Part 1)
  8. Hedge Funds Investor Considerations (Part 2)
  9. Hedge Funds Strategies
  10. Hedge Funds Relative Value Trading
  11. Hedge Funds Event Driven Strategies
  12. Hedge Funds Directional Strategies
  13. Hedge Funds Other Strategies
  14. Hedge Funds Replication

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