• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Hedge funds strategy. This assignment will analyse two hedge fund strategies namely Opportunistic and Macro to make comparison with a benchmark buy-and-hold approach by making a comparison of the historic returns

Extracts from this document...

Introduction

I. INTRODUCTION Although bestowing upon the investors profit, the growth of the stock market also brings a lot of risk. Therefore, the investors have to look for the methods to keep the risk at a minimum if they want to get the maximum benefit. From the 19th century, hedge funds have become more and more vital investment instruments on the financial markets. In recent years, as a lot of investors want to take part in the superior gains, the capital invested in such funds has grown fast. According to the estimation of TheCityUK, from 2000 to 2010 the global number of hedge funds grew from below 2000 to just under 9000, whereas at the same time the invested capital went up from 1000 bn assets to nearly 2200 bn asset (TheCityUK, 2010)1. Therefore, the hedge fund was established as one of the best way to help the investors protect their investment portfolio from the instability of markets. This assignment will analyse two hedge fund strategies namely Opportunistic and Macro to make comparison with a benchmark buy-and-hold approach by making a comparison of the historic returns and an overview of the nature of the risk of two strategies of the Greenwich Strategy Group Indices (which are the Opportunistic and Macro), the FTSE 100 Index and the S&P 500 TR Index. II. BODY Generally, hedge fund refers to a private investment method for wealthy individuals or institutional investors. ...read more.

Middle

In order to choose the best way for the investors, it is necessary to analyse the risk of the Opportunistic, the S&P 500 TR Index and the FTSE 100 Index. The below chart 3 expresses the standard deviation of 3 and 5 year annualised of the Opportunistic, the FTSE 100 Index and the S&P 500 TR Index. Standard deviation is the rate which is used to examine the volatility of the historical returns hence it helps the investors identify what stocks, trade options or bonds have a small fluctuation. It is very important because the investment has strong movement (for example, bonds or stocks have high standard deviation) which has more risk than the steady investment (bonds or stocks have low standard deviation). According to chart 3, the standard deviation of the Opportunistic is the lowest. More specifically, the 3 year annualised standard deviation of the Opportunistic is 8.1% much smaller than the S&P 500 TR Index with 15.6% and the FTSE 100 Index with 14.7%. Moreover, the 5 year annualised standard deviation of the Opportunistic is 8.8% while the rate of the S&P 500 TR Index is the highest with 19%. Over the same period, the standard deviation of the FTSE 100 Index is 17% bigger compared to the rate of the Opportunistic. As a result, the investors can get the lowest risk if they invest by the Opportunistic strategy. ...read more.

Conclusion

Klein. Eds. , Hedge Funds. Irwin Professional Publishing, New York, pp. 1-17. 3. Columbia Investment Management Association, 2007, What is a hedge fund, Columbia University, 3022 Broadway, New York. 4. Greenwich Alternative Investments, 2012, Hedge Fund Strategy Definition, http://www.greenwichai.com, viewed date May 12th 2012. 5. Greenwich Alternative Investments, 2012, Hedge fund strategy performance, http://www.greenwichai.com, viewed date May 12th 2012. 6. Greenwich Alternative Investments, 2012, Hedge Fund Indices, http://www.greenwichai.com, viewed date May 12th 2012. 7. TheCityUK, 2010, 'Hedge Funds', Financial Markets Series, UK. 8. Itzhak Ben-David, Francesco Franzoni, Rabih Moussawi, 2010, 'The Behavior of Hedge Funds during Liquidity Crises', Charles A. Dice Center for Research in Financial Economics, Fisher Business of Business. 1 TheCityUK, 2010, 'Hedge Funds', Financial Markets Series, UK 2 Alternative Investment Management Association, 2010, Hedge Fund Booklet, Australia http://www.aima-australia.org/forms/AIMA_HF_BOOKLETJan09.pdf 3 Caldwell, T., 1995, Introduction: The model for superior performance, in: J. Lederman, R.A. Klein. Eds. , Hedge Funds. Irwin Professional Publishing, New York, pp. 1-17 4 Greenwich Alternative Investments, 2012, Hedge Fund Strategy Definition 5 Greenwich Alternative Investments, 2012, Hedge fund strategy performance, http://www.greenwichai.com, viewed date May 12th 2012 6 Greenwich Alternative Investments, 2012, Hedge Fund Indices, http://www.greenwichai.com, viewed date May 12th 2012 7 Greenwich Alternative Investments, 2012, Hedge Fund Indices, http://www.greenwichai.com, viewed date May 12th 2012 8 Greenwich Alternative Investments, 2012, Hedge Fund Indices, http://www.greenwichai.com, viewed date May 12th 2012 9 Greenwich Alternative Investments, 2012, Hedge Fund Indices, http://www.greenwichai.com, viewed date May 12th 2012 ?? ?? ?? ?? 0 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our University Degree Finance section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related University Degree Finance essays

  1. Project on portfolio management in Mutual Funds. The analysis and advice presented in ...

    1,21,805 crores. Fourth Phase - since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the

  2. Risk mitigation strategies for Easyjet

    a different business model to Easyjet therefore will be able to invest more into their hedging strategies. In such volatile markets it was incorrect for Easyjet to lock in fuel prices over a period of 12 months, where in fact they should have initiated contracts over a smaller time period

  1. Participants in derivatives market.

    The government also rescinded in March 2000, the three decade old notification, which prohibited forward trading in securities. Derivatives trading commenced in India in June 2000 after SEBI granted the final approval to this effect in May 2001. SEBI permitted the derivative segments of two stock exchanges, NSE and BSE,

  2. Capital Markets & Investments. This reports main aim is to experiment my knowledge upon ...

    the company because at the time their share price was paying off its current investors very well as you can see from the table on the left. Although I knew that selecting bonds would be a risk free option as Robinson & Thomas (1991), bonds gives a fixed return with

  1. What is the role of arbitrage in the determination of the stock index futures ...

    If not, the customer's position is closed. Day 3 The price of the corn futures rises to $2.08 per bushel. Change in futures price: $2.08 - $2.04 = $0.04 per bushel Investor's gain: 2 x 5, 000 x $0:04 = $400 Margin Account Balance: $946 + $400 = $1, 346 $400 is more than the initial margin so the customer can take out $400.

  2. Describe in detail a major hedge fund trading strategy

    Some of the top performing hedge funds with long-short equity hedge trading strategies include Blackrock, Marshall Wace, etc. 1. WHAT IS LONG SHORT EQUITY HEDGE STRATEGY Fung et al (1997) classified a hedge fund?s strategy in terms of their style and location.

  1. Provident Fund Rules

    1. The membership of the Board of Trustees shall be open to all Members and comprise of the following: 1. Chairman ? nominated 2. Secretary ? nominated 3. Member ? nominated 1. Each Member of the Board of Trustees shall be by nomination and secondment from two-thirds of Members present at an annual general meeting.

  2. This is an investment simulation, where we have invested TK. 1, 000,000 in the ...

    TRADING STRATEGIES Our investment horizon started from February, 3, 2011 and ended at April, 6, 2011. During this period we have seen the market situation, analyzed different company stocks and selected our optimum portfolio using different theories. We not only looked at the profitability but also at the reliability and stability of stocks.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work