scholarly journals Comparing Hedge Funds: Highest Return Strategy

2021 ◽  
Vol 23 ◽  
Author(s):  
Vuk Janus ◽  
Greyson Robin Meek
Keyword(s):  
Interest Rates ◽  
Hedge Funds ◽  
Hedge Fund ◽  
Fold Increase ◽  
Equity Market ◽  
Annual Growth Rate ◽  
Investment Strategies ◽  
Individual Strategy ◽  
Low Interest Rates ◽  
Fund Research

Since 1997, the hedge fund industry has grown at a compounded annual growth rate of 16.07%, resulting in a 26-fold increase from its original value to its present value of $3.1 trillion Assets Under Management. This study researched the varying investment strategies used by hedge funds to determine the strategy that provides the highest returns for its investors. From the previous literature, the study identified Long/Short Equity, Global Macro, Arbitrage, Event Driven, and Cross-Asset Multi-Strategy as viable and relevant investment approaches. Using hedge fund index data from Bloomberg, Hedge Fund Research, Eureka Hedge, Barclay’s, and Credit Suisse, returns for each respective strategy were collected and compared against the Bloomberg Global Hedge Fund (BHEDGE) Index and the S&P 500 Index. Alpha adjusted returns for each strategy were later calculated and plotted against the average weighted returns of each individual strategy. The results of this study show that the L/S Equity strategy provided the highest returns for its investors. Specifically, only the L/S Equity strategy outperformed the BHEDGE Index by a narrow margin, while all other strategies provided negative alpha figures. All hedge fund strategies outperformed the overall equity market on a year-to-date basis, however, provided negative alpha returns when compared to the S&P 500 1-Year market gains. This deficit between hedge funds and the overall equity market can be attributed to the COVID-19 pandemic and its inflationary effects through low interest rates, market stimulus packs, and an increased money supply.

Evaluating Hedge Fund Performance

2017 ◽  
Author(s):  
David M. Smith
Keyword(s):  
Hedge Funds ◽  
Hedge Fund ◽  
Fund Performance ◽  
Equity Market ◽  
Investment Strategies ◽  
Worst Case ◽  
Security Selection ◽  
Sharpe Ratios ◽  
Hedge Fund Performance ◽  
Fund Portfolio

A diverse set of measures allow investors to evaluate hedge fund portfolio managers’ performance across different dimensions. The various measures quantify the effectiveness of security selection; account for investor flows, operating risk, and worst-case investment scenarios; net out benchmark and peer-fund performance; and control for risk factors that are unique to hedge fund investment strategies. Hedge fund return information in published databases is usually self-reported, which is a conflict of interest that produces several reporting biases and inflated published average returns. After adjusting for these biases, hedge fund average returns trail equity market returns and in fact almost exactly equal U.S. Treasury bill average returns between January 1994 and March 2016. Yet, after risk adjustment, the hedge fund performance picture brightens. In the aggregate, hedge funds have higher Sharpe ratios and multifactor alphas, and lower maximum drawdown levels than equity market benchmarks.

Issues in Hedge Fund Research

2017 ◽  
Author(s):  
Thuy Bui ◽  
Abhishek Ganguly
Keyword(s):  
Performance Measurement ◽  
Hedge Funds ◽  
Hedge Fund ◽  
Financial Innovation ◽  
Investment Strategies ◽  
Regulatory Oversight ◽  
Fund Managers ◽  
Disclosure Requirements ◽  
Measurement Biases ◽  
Fund Research

This chapter explores the various issues and challenges that confront financial economists researching hedge funds. Besides being complex investment vehicles, hedge funds are private entities that are subject to little regulation and disclosure requirements and are less transparent by nature. Such lax regulatory oversight also enables hedge funds to become the venues for financial innovation and cutting-edge investment strategies. As a result, research in hedge funds not only attempts to keep up with the continuous advancement in strategies employed by hedge fund managers but also suffers from several data issues, performance measurement biases, and endogeneity issues. These biases in hedge fund research considerably limit the accuracy and, more importantly, the generalizability of the findings. Thus, users of hedge fund research should be mindful of its limitations.

Global Derivatives Hedge Fund Strategies

2017 ◽  
Author(s):  
Christopher J. Barnes ◽  
Ehsan Nikbakht ◽  
Andrew C. Spieler
Keyword(s):  
Interest Rates ◽  
Hedge Funds ◽  
Hedge Fund ◽  
Investment Strategies ◽  
Related Factors ◽  
Managed Futures ◽  
Country Level ◽  
Investment Manager ◽  
High Level ◽  
Exchange Rates Volatility

Hedge funds represent discretionary pools of capital that have very flexible investment strategies. Some funds allocate capital to derivative-based strategies on a global basis, loosely referred to as global macro funds. These investments are typically high-level, directional views on exchange rates, volatility, interest rates and other macro-related factors. In short, this “go anywhere” strategy often uses futures, forwards, and options on equities as well as interest rates and currencies. The investment manager employs top-down investments by placing high-level bets at the country level as well as taking positions in stock, currency, and derivatives on particular countries based on economic views. Many global macro funds increasingly use systematic managed futures, although fewer funds follow a discretionary managed futures strategy.

scholarly journals Current Investment Strategies for Private Individuals as Small Investors in Times of Low Interest Rates

2020 ◽  
pp. 32-44
Author(s):  
Ing. Martin A. Moser, MA. MSc
Keyword(s):  
Interest Rates ◽  
Wealth Accumulation ◽  
Investment Strategies ◽  
Television Programs ◽  
Individual Level ◽  
Advantages And Disadvantages ◽  
Low Interest Rates ◽  
Small Investors ◽  
Private Investors ◽  
The Right

Money plays an important role, both on a social and an individual level. Secure forms of investment hardly bring any interest. Also, state financial support has changed and will continue to do so in the future. A constructive, forward-looking approach to private finances and long-term wealth accumulation are therefore becoming increasingly important. Finding the right system at the right time is a challenge that small private investors have to face continuously. On the internet, in magazines or television programs, investors will find a flood of information. The fact that unlimited amounts of data can be accessed, often creates more confusion than perspective. This applies particularly to the investment business. Based on a literature review, this article provides an overview of current forms of investment for small private investors and uses qualitative research via problem-centered interviews to critically compare their advantages and disadvantages in times of low interest rates.

The Dynamis Fund: An Energy Hedge Fund

2017 ◽  
pp. 1-12
Author(s):  
George (Yiorgos) Allayannis ◽  
Mark R. Eaker ◽  
Alec Bocock
Keyword(s):  
Performance Evaluation ◽  
Asset Management ◽  
Hedge Funds ◽  
Mutual Fund ◽  
Hedge Fund ◽  
Investment Strategies ◽  
Futures Options ◽  
Pros And Cons ◽  
Oil Sector ◽  
Evaluation Techniques

Fred Bocock was examining the performance of the Energy Hedge Fund and the Energy Portfolio, a hedge fund and a mutual fund respectively, which he manages. Bocock had become increasingly aware that absolute returns or relative returns (returns relative to a benchmark) may not adequately capture his performance and some measure of risk-adjusted performance was necessary. The Dynamis Energy Hedge Fund extends the discussion of performance evaluation into the hedge fund arena. (See “Zeus Asset Management,” UVA-F-1232, for an examination of performance evaluation techniques in the mutual funds arena.) More broadly, the case engages students in discussions on what hedge funds are, what investment strategies they use, and who their investors are. Since the portfolio manager of Dynamis manages both an oil sector equity mutual fund and an oil sector hedge fund, the case allows for a comparison between a hedge fund and a mutual fund. Students should consider the pros and cons of evaluating the performance of the oil stock mutual fund against a number of oil sector stock indices as well as against a number of generic indices, such as the S&P 500 Index. The use of futures, options, shorts, and leverage by hedge funds makes it a lot more difficult to measure their performance. The case comes with a spreadsheet that contains data on the energy mutual fund, the Dynamis hedge fund, and several relevant indices.

Hedge Fund Due Diligence at Leman Alternative Asset Management Company

2017 ◽  
pp. 1-15
Author(s):  
Pedro Matos
Keyword(s):  
Asset Management ◽  
Hedge Funds ◽  
Hedge Fund ◽  
Equity Market ◽  
Return Volatility ◽  
Due Diligence ◽  
Case Discussion ◽  
Management Company ◽  
Track Record ◽  
Monthly Return

In early January 2008, a senior VP with LAAMCO, a fund of hedge funds known for alternative investments, was conducting due diligence on an equity market-neutral hedge fund. The hedge fund used an option strategy known as a collar (also known as a bull spread or split-strike conversion). The track record of the hedge fund had been stellar. The fund's performance had not only beaten that of the S&P 500 Index over the same period but had done so with much lower monthly return volatility. As part of the due diligence, it was necessary to backtest the collar strategy and try to quantify how much value the manager, BLM Investment Securities, LLC, (BLM) had added. The case is a disguised representation of an actual hedge fund—the true identity of BLM is revealed to students at the end of the case discussion.

Investment Strategies of Hedge Funds

2021 ◽  
pp. 112-135
Author(s):  
Hany A. Shawky
Keyword(s):  
Capital Structure ◽  
Hedge Funds ◽  
Yield Curve ◽  
Hedge Fund ◽  
Investment Strategies ◽  
Fixed Income ◽  
Relative Value ◽  
Merger Arbitrage ◽  
Arbitrage Strategy ◽  
And Performance

This chapter reviews a number of different hedge fund strategies, including equity hedge, long/short, market neutral, relative value arbitrage, convertible arbitrage strategy, capital structure arbitrage strategy, fixed income arbitrage strategy, yield curve arbitrage strategy, other relative value arbitrage strategies, emerging markets strategies, global macro strategies, event driven strategies, distressed securities, and merger arbitrage strategies. In addition, the author discusses the growth and performance of different strategies, as well as fraud, fund failures, activism, and regulation.

scholarly journals Liquidity Risk, Return Predictability, and Hedge Funds’ Performance: An Empirical Study

2013 ◽  
Vol 48 (1) ◽  
pp. 219-244 ◽  
Author(s):  
Rajna Gibson Brandon ◽  
Songtao Wang
Keyword(s):  
Empirical Study ◽  
Emerging Markets ◽  
Hedge Funds ◽  
Hedge Fund ◽  
Liquidity Risk ◽  
Equity Market ◽  
Return Predictability ◽  
Superior Performance ◽  
Managerial Skills ◽  
Risk Return

AbstractThis article analyzes the effect of liquidity risk on the performance of equity hedge fund portfolios. Similarly to Avramov, Kosowski, Naik, and Teo (2007), (2011), we observe that, before accounting for the effect of liquidity risk, hedge fund portfolios that incorporate predictability in managerial skills generate superior performance. This outperformance disappears or weakens substantially for most emerging markets, event-driven, and long/short hedge fund portfolios once we account for liquidity risk. Moreover, we show that the equity market-neutral and long/short hedge fund portfolios’ “alphas” also entail rents for their service as liquidity providers. These results hold under various robustness tests.

scholarly journals The Nexus Between Hedge Fund Size and Risk-Adjusted Performance

2021 ◽  
Vol 66 (3) ◽  
pp. 40-56
Author(s):  
Daniela Catan
Keyword(s):  
Hedge Funds ◽  
Inverse Relationship ◽  
Hedge Fund ◽  
Investment Strategies ◽  
Previous Evidence ◽  
Fund Size ◽  
The Relationship

Abstract This paper explores the relationship between hedge fund size and risk-adjusted performance employing a data sample of 245 US hedge funds classified into eight different investment strategies. The studied period spans from January 2005 to February 2021, with calculations performed both on the whole coverage period as well as three sub-periods, to isolate the pre-crisis, crisis, and post-crisis funds’ behavior. Similar to previous evidence found in the literature, the results reveal an inverse relationship between hedge fund size and risk-adjusted performance (as measured by the Sharpe, Treynor and Black-Treynor ratios) in most of the cases.

Hedge Funds Fundamentals

2017 ◽  
Author(s):  
H. Kent Baker ◽  
Greg Filbeck
Keyword(s):  
Hedge Funds ◽  
Hedge Fund ◽  
Fund Performance ◽  
Investment Strategies ◽  
Intended Audience ◽  
History Of ◽  
Background Material ◽  
Fund Investment ◽  
Hedge Fund Performance ◽  
Distinguishing Features

This chapter provides background material for understanding the multifaceted nature of hedge funds. The first section begins by defining a hedge fund, followed by a discussion of distinguishing characteristics, benefits and risks, history of hedge funds, hedge fund investment strategies, funds of funds, hedge fund performance, and hedge fund biases, including selection bias, survivorship bias, backfill bias, and liquidation bias. The next section discusses the purpose of the book followed by sections on its distinguishing features and the intended audience. The chapter then outlines the six major parts of the book, including an abstract for each of the remaining 29 chapters. These six parts are (1) background, (2) structure of hedge funds, (3) investment strategies of hedge funds, (4) risk and regulation, (5) hedge fund performance, and (6) issues, trends, and future prospects of hedge funds. The final section offers a summary and conclusions.

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