Absolute Returns: The Risk and Opportunities of Hedge Fund by Alexander M. Ineichen

By Alexander M. Ineichen

The area of making an investment floats on an enormous sea of phrases, so much of that are visible, simple-minded, and clichés, and all of these are risky to monetary future health. the tale during this ebook bears no relation to all that stuff. Ineichen’s message is unique, strong, complete, and necessary to powerful monetary future health. The literary readability he blends together with his monetary knowledge is an extra blessing. –Peter L. Bernstein, President, Peter L. Bernstein, Inc., writer of opposed to the Gods and the facility of Gold

''No you possibly can have enough money to hazard cash in hedge money with out examining this entire advisor. the main points are illuminating, presentation pleasing, research amazing and classes profound. an excellent contribution to the hedge fund literature.'' –Prof. Narayan Y. Naik, Director, Centre for Hedge Fund examine and schooling, London enterprise college

''A reliable knowing of the operating of the hedge fund industry and hedge fund innovations is necessary for each lively investor. Ineichen’s ebook does an outstanding task tying jointly historic, empirical, and theoretical research in a manner simply available to practitioners. A extra accomplished exam of the hedge fund industry and hedge fund options will be demanding to find.'' –Hans de Ruiter, ABP Investments, Senior Portfolio supervisor Quantitative fairness ideas

''Hedge cash are usually not mainstream and this ebook isn't mainstream both. the writer demanding situations conventional funding paradigms and how traders take into consideration threat. an exhilarating learn and a needs to for each expert investor.'' –Dr. Burkhard Poschadel, leader government Officer, GAM

''Written for the pro investor, Alexander Ineichen’s e-book offers a complete, in-depth research of other funding innovations. Combining the newest study together with his personal insights, Ineichen has produced the definitive examine of hedge cash and money of hedge funds.'' –Richard Elden, Chairman, Grosvenor Capital administration, L.P.

''Alexander Ineichen’s in-depth study findings and analytical perception are introduced jointly during this e-book that's chock-full of invaluable facts on hedge fund concepts. Definitions, examples, return/risk parameters, and key hazard elements are supplied for every procedure. This finished e-book is a need for each hedge fund investor.'' –Lois Peltz, President, Infovest21

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Additional info for Absolute Returns: The Risk and Opportunities of Hedge Fund Investing

Example text

9. We shall revisit operational risks with hedge funds in Part III of this book, which will examine the fund of (hedge) funds industry. 10 summarizes the categorization of hedge funds. In any portfolio optimization process there is some merit in viewing hedge funds as a separate asset class, because the performance characteristics differ from those of traditional assets. , one of the satellites). In evaluating hedge funds there are many risk aspects where the only reasonable approach is bottom-up fundamental company research and due diligence.

INVESTMENT PHILOSOPHY OF ABSOLUTE RETURN MANAGERS Introduction An absolute return manager is essentially an asset manager without a benchmark or with a benchmark that is the return on the risk-free asset. Benchmarking can be viewed as a method of restricting investment managers so as to limit the potential for surprises, either positive or negative. By defining a market benchmark and a tracking error band, the plan sponsor gives the manager a risk budget in which the manager is expected to operate.

The absolute return manager could argue that the first four columns have nothing to do with asset management or risk management. Absolute return managers want to make profits not only when the wind is at their backs but also when it changes and becomes a headwind. Absolute return managers will therefore use risk management and hedging techniques—this is where the asymmetrical return profile discussed earlier comes from. From the point of view of absolute return managers, relative return managers do not use risk management,* and do not manage assets as they follow benchmarks.

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