A Guide to Hedge Fund Return Sources
Buch, Englisch, 300 Seiten
ISBN: 978-1-84374-938-7
Verlag: Euromoney
Focusing on return sources and the relationship of returns to systematic risk it looks through the smoke screen of the search for alpha to fully evaluate the nature, risks and return profiles of individual hedge fund strategies. Learn how strategies earn much of their returns by assuming risks that can be readily analysed and understood by investors and how after many years of research the hedge fund replication and alternative beta discussion has finally reached mainstream investors. Essential reading for all financial professionals who work for allocate assets to hedge funds including private and institutional investors, fund of funds managers, hedge funds managers themselves, brokers, administrators and custodians.
Also helpful to anyone addressing the challenges of hedge funds, including traditional asset managers, financial analysts, consultants and advisors. If you wish to understand the background of the new discussion on hedge funds replication and how to derive the returns of many hedge fund strategies at much lower cost, differentiate the various underlying approaches, or simply wish to understand in greater detail how hedge fund replication can improve your own investment process into hedge funds, you have to come to the right place.
Autoren/Hrsg.
Fachgebiete
Weitere Infos & Material
List of Contents Foreword Preface to the second edition About the author 1 Introduction New popularity, old confusion Why this book was written Leaving Alphaville Alternative versus traditional beta The replication revolution The challenges of understanding hedge funds Who can benefit from this book How this book is different What is in this book Part 1 - Background 2 What is a hedge fund? Characteristics of hedge funds Are hedge funds an asset class? Taxonomy of hedge funds The structure of a hedge fund Limited partnership Prime broker Execution brokers Administrator Custodian Fund of hedge funds Myths, misperceptions and realities about hedge funds 3 Development of the hedge fund industry History of hedge funds The hedge fund industry today Is there an emerging hedge fund bubble? The future of hedge funds - opportunities and challenges Generate attractive returns in challenging market conditions Dispel the myths about hedge funds Introduce reliable independent risk management 4 Empirical return and risk properties of hedge funds When the Sharpe ratio is not sharp enough Challenges of hedge fund performance measurement Sources of empirical data Risk and return Comparison with equities and bonds Unconditional correlation properties Conditional returns and correlations Hedge fund behaviour in extreme market situations Benefits of hedge funds in a traditional portfolio Quantitative portfolio optimisation revisited Summary of empirical properties 5 The individual hedge fund strategies Equity hedged - long/short equity Equity hedged - equity market neutral A pair trading example Equity hedged - equity market timing Equity hedged - short selling Relative value - general Relative value - convertible arbitrage Static returns Gamma trading Identifying pricing inefficiencies in the convertible bond market Relative value - fixed income arbitrage Excursion: LTCM Relative value - volatility arbitrage Relative value - capital structure arbitrage Event driven - general Event driven - merger arbitrage Event driven - distressed securities Event driven - Regulation D Opportunistic - global macro Managed futures Managed futures - systematic Excursion: the turtles Managed futures - discretionary Part 2 - Return sources 6 What drives the hedge fund returns? The hedge fund return enigma Is it alpha or is it beta? The academic side speaks: the efficient market hypothesis Questioning the efficient market hypothesis: behavioural finance The theoretical framework of modern finance: asset pricing models and the interpretations of alpha Normal return distribution A single source of systematic risk Frictionless trading Homogeneity of investor behaviour A first model for hedge fund returns Market inefficiencies: the 'search for alpha' The decrease of alpha Systematic risk premia: the prevalence of beta Risk premia and economic functions in capital markets Momentum and value strategies Active strategies and option-like returns The beauty of alternative beta The future of hedge fund capacity Why manager skill matters Buyer beware: some final words of caution about hedge fund returns 7 Return sources of individual hedge fund strategies Modelling hedge fund returns - a simple example Asset pricing models for hedge fund strategies: revisiting Sharpe's approach The development of hedge fund factor models Two sets of factor models for the single hedge fund strategies How good are our models? Is it alpha just because we cannot model it? Mimicking hedge fund strategies - another approach to modelling returns Relating hedge fund returns and risk premia: what we can model? Long/short equity Equity market neutral Short selling General relative value Fixed income arbitrage Convertible arbitrage Merger arbitrage Distressed securities and Regulation D Global macro Managed futures Variability of risk exposures and persistence of alpha The future of alpha Part 3 - Practical application 8 Alternative beta strategies and hedge fund replication A first approach to hedge fund replication - top down: linear factor models and time series replication models The distributional approach The bottom-up approach: extraction of alternative beta and 'alternative beta strategies' New exotic beta The question of asset allocation The limitations of hedge fund replication Summary 9 Benchmarking hedge fund performance The problem with measuring alpha returns Hedge fund indexing: accounting for beta Existing hedge fund indices and their pitfalls What to look for in an index Divergence in hedge fund indices Shortcoming of current investable indices 1 The benefits of hedge fund indices The way to true hedge fund indices Portable alpha Appendix I: Selected data providers for hedge fund performance 10 Hedge fund portfolio management The tasks of the hedge fund portfolio manager The fee issue Sector allocation Pitfalls of quantitative analysis Elements of successful strategic sector allocation The winds of change - tactical sector allocation Manager selection Manager selection steps Areas of examination The idea of a core-satellite approach to hedge fund investing Active post-investment risk management Portfolio versus manager risk Managing the managers Transparency Valuation of hedge funds The issue of liquidity Quantitative elements of risk analysis Managed accounts for risk management Special challenges to funds of funds Part 4 - Challenges ahead 11 Conclusion and outlook Beyond the 'Wizard of Oz' Three key challenges A bright future Glossary Bibliography
