Tag Archive | "Hedge"

Understanding Hedge Fund Management Styles


While performing due diligence on a potential hedge fund, you should take the time to get to know the management style favored by those who will be managing your investment. Most hedge fund managers have a specialty, and this expertise is often directly related to the types of decisions that will be made and which markets will be explored for profit potential. Understanding the performance style will also allow you to track the general returns for similar styles in the past, providing a more thorough evaluation of the hedge fund overall.

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International Hedge Fund Investment Strategies


Hedge funds open up a global market for the savvy investor. Emerging markets as well as established financial powers have clear advantages and disadvantage that can be used to obtain absolute profits that are not dependent upon any particular stock market or exchange.

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Assessing Hedge Fund Risk


Assessment of risk is one of the primary aspects of due diligence when evaluating a potential hedge fund. Because hedge funds are designed to obtain absolute growth despite market conditions, there are many areas where the short term volatility of a particular investment may cause some high-risk funds to lose value. Understanding these risks requires an objective means of measuring the volatility and how it relates to the investment strategies employed by the fund manager. Just as the management styles and portfolio holdings are different from fund to fund, so too may be the type of assessment used to evaluate risk.

Most diligent hedge fund managers use several different types of financial equations to evaluate volatility, and thus risk, in any given portfolio. In general, managers will use one or more of the following to assess risk: The Sharp Ratio, The Sortino Ratio, or The Sterling Ratio. These are not the only measures of volatility and risk, but they are some of the more common measures used. When evaluating a particular level of risk, it is important to choose the right type of evaluation in order to get numbers that are meaningful and directly related to the types of investments within the fund.

The Sharp Ratio measures risk-adjusted performance. In terms of risk, the standard deviation of portfolio returns is used as a measure. The return is then adjusted for a known risk-free asset, such as a Treasury bills or some other asset that has a guaranteed return.

The Sortino Ratio measures the amount of incremental return that can be obtained per level of risk. The Sortino ratio uses the downside deviation to measure volatility. In this method of measuring volatility, an acceptable rate of return must be assigned – typically this is set at 0% for hedge funds, but that is not always the case.

The Sterling Ratio divides the annualized return of the portfolio by the average yearly maximum drawdown, minus a certain percentage. Drawdown is a measure of loss over time. It starts with the beginning of the loss and continues until the stock or other asset begins to improve – this measure, taken over time, is the maximum drawdown. My analyzing this drop in prices, the hedge fund manager can assess the amount of negative volatility, and therefore, make an educated assessment of the risk.

It is important to remember that none of these ratios are absolutes. They are only estimates of potential investment viability, and as a result, are only as accurate as the estimations of the hedge fund managers themselves. Keeping track of volatility with regards to hedge funds is prudent on several fronts. Positive volatility can be used to make large gains in a relatively short amount of time. And by hedging against negative volatility, the successful hedge fund investor can curb losses that would result in poor returns for investors. You must have a manager you trust when it comes to evaluating the numbers presented – an over or underestimation could skew results to the point that they are meaningless with regards to volatility measure.

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Investing in Multiple Hedge Funds


If you truly want to take advantage of the options available through hedge fund investment, you should consider investing in multiple hedge funds. Because many hedge fund portfolios are specialized around the expertise of the managers, by investing in two or more of these types of funds, you can take gain returns in various sectors of business or other investment, while diversifying your hedge fund portfolio.

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Choosing the Right Hedge Fund Manager


The most successful hedge fund investment strategies hinge on having the right manager. Without the right hedge fund manager at the helm, even the best fund strategies can fall apart. Top performers are often well-recognized in the field, but choosing the right manager for your investment should be more than just a simple popularity choice. Choosing a hedge fund manager that you know you can trust will give you a solid foundation for branching out into different types of hedge funds underneath the same stellar management.

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How to Choose the Right Hedge Fund


Hedge funds offer an attractive alternative to traditional means of investment, and choosing the right fund is crucial to maximizing your returns. Because there are so many different types and styles of hedge funds available, choosing the right one may seem like a daunting or tedious process. View full post on Investing Articles from EzineArticles.com

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Hedge Fund of Funds for Clean Tech


TerraVerde Capital looks for managers investing across the carbon-footprint supply chain — solar, wind, biomass, biofuels, weather and agriculture, even water and water pipes, says managing member Richard Bookbinder. Jonathan Burton reports.


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Hedge Fund Strategies as a Core Component


Evaluating fund managers and investment philosophies can be a challenge for investors looking to diversify their portfolios. Kristen McNamara talks with Charles Krusen, CEO of Krusen Capital Management, who believes that hedge strategies should be a core component of investment portfolios.


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News Hub: Hedge Fund Titan Passes Baton


The founder of hedge fund Renaissance Technologies retired in January and has named two top lieutenants in his stead, Jenny Strasburg reports on the News Hub.


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cXVpY2tpbnZlc3QubmV0L3dwL3dwLWNvbnRlbnQvd29vX3VwbG9hZHMvNC1xLmpwZyI7aTozO3M6NjE6Imh0dHA6Ly9xdWlja2ludmVzdC5uZXQvd3Avd3AtY29udGVudC93b29fdXBsb2Fkcy8zLXFpbG9nby5qcGciO308L2xpPjxsaT48c3Ryb25nPndvb192aWRlb19jYXRlZ29yeTwvc3Ryb25nPiAtIFNlbGVjdCBhIGNhdGVnb3J5OjwvbGk+PC91bD4=