Setting Up a Hedge Fund - Where Should it Be and What Should You Do - Part 1

by Dermot S. L. Butler The problem with writing about a topic such as starting up a hedge fund is that there are so many questions that have to be asked - for example, where do you want the fund to be established. The answer to these questions usually begs another question, so I am just warning you that this is going to be a long and, perhaps, convoluted paper, and indeed it will probably be spread over 2 months. This month will be more of a descriptive and discussion paper - next month will be more procedure and checklist orientated.…

Managed Futures - Overview

“Managed futures” refers to an asset class offered by professional money managers who are known as “commodity trading advisors” (CTAs). CTAs are required to register with the U.S. government's Commodity Futures Trading Commission (CFTC) through the “National Futures Association” (NFA), before they can offer themselves to the public as money managers. Commodity Trading Advisors are also required to go through an FBI deep background check, and provide comprehensive disclosure documents, which are required to be updated every nine months and reviewed by the NFA before investment services can be offered. “Managed futures” is arguably the first and oldest hedge fund style, having been in existence for over 30 years.…

Understanding Relative-Value Arbitrage

Relative-value arbitrage is an investment strategy that seeks to take advantage of price differentials between related financial instruments, such as stocks and bonds, by simultaneously buying and selling the different securities—thereby allowing investors to potentially profit from the “relative value” of the two securities.…

Understanding Long Bias Strategy

The long-bias hedge fund strategy essentially serves as an investment halfway house in between a market-neutral fund and a long-only fund. Rather than putting on positions that cancel out as found in a market neutral fund, or having substantial long exposure as in a long-only fund, a long-bias fund maintains a differing ratio of long positions (compared to short positions) that usually exceeds 40%. With this definition in mind, a hedge fund with a long/short equity strategy could transition into a long-bias hedge fund, and vice versa, depending on how its assets were allocated. It should also be noted that long-bias hedge funds emerged during the 1990s during the bull market that concomitantly saw a marked decrease in the number of short-only hedge funds. The long-bias investment model became a key investment strategy to benefit from a rising market while still affording flexibility to short certain stocks or segments in the market.…

Equity Long-Short

An equity long-short strategy is an investing strategy, used primarily by hedge funds, that involves taking long positions in stocks that are expected to increase in value and short positions in stocks that are expected to decrease in value.…

Investing in Distressed Securities

Distressed securities may be an attractive investment option for sophisticated investors who are looking for a bargain and are willing to accept some risk.…

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