Hedge funds

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Hedge Funds Size, Strategies and Importance for
Financial Market Stability
Nikolina Grigorova
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Contents

• Hedge Funds Definition, Size, Characteristics

• Top 10 List of Hedge Fund Earners

• Diversity within the Hedge Fund Industry

• Hedge Fund Strategies

• Investments and Importance for Financial Market
  Stability

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Hedge Fund what kind of animal is that?
Hedge fund means a private investment partnership, which is allowed to use advanced investment tools.
The first hedge fund was established by A.W.Jones in 1949 in US. He combined the use of short selling long selling leverage
Money that the hedge fund uses to operate
Equities
5 mill.
Assets bonds, stocks, etc.
invest
15 mill.
Debt
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Main Characteristics
Formed as a limited partnership non bank institution
Participans institutional or accredited investors (not more than 100)
Extremely high minimum investment amounts, ranging from 250,000 to over 1 million
Often located offshore for tax and regulatory reasons
Managers are paid on fee-for-performance basis
Use of leverage, short and long positions, derivatives
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Size matters!
Estimated Number of Hedge Funds
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Size matters! (2)
Estimated Hedge Fund Assets under Management (
Billions)
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Top 10 Hedge Fund Earners

• 1. T.Boone Pickens - estimated 2005 earnings
  1.5bn
• 2. Stevie Cohen, SAC Capital Advisers - 1bn
• 3. James Simons, Renaissance Technologies Corp.
  - 900m - 1bn
• 4. Paul Tudor Jones, Tudor Investment Corp. -
  800m - 900m
• 5. Stephen Feinberg, Cerberus Capital
  Management - 500 - 600m
• 6. Bruce Kovner, Caxton Associates - 500m -
  600m
• 7. Eddie Lampert, ESL Investments - 500m -
  600m
• 8. David Shaw, D.E. Shaw Co - 400m - 500m
• 9. Jeffrey Gendell, Tontine Partners - 300m -
  400m
• 10. Louis Bacon, Moore Capital Management - 300m
  - 350m

Source Trader Monthly Magazine
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Diversity within the Hedge Fund Industry
Macro funds
Global funds
Relative value funds

• Join the hedge fund circus!

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Hedge Fund Strategies
Long-short equity
Event-driven strategies, example Merger (risk) arbitrage strategy
Global macro strategies
Relative value strategy
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Hedge funds Nearly Bring Down World System
Source www.nicholsoncartoons.com.au
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Investments and Importance for Financial Market
Stability
Each episode of volatility in the financial markets attracts the attention on the role of the hedge funds Each episode of volatility in the financial markets attracts the attention on the role of the hedge funds
Do they really destabilize the foreign exchange markets? Do they really destabilize the foreign exchange markets?
The phenomenon of herding The phenomenon of herding
Measures taken by governments Protecting investors Ensuring the integrity of markets Promoting stability
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The degree to which an investor or business is
utilizing borrowed money. Companies that are
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