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Hedge Funds Lecture 1: Overview

Hedge Funds Lecture 1: Overview. Ezra Zask Yale University September, 2005. Definition. Investment approach A sub-set of alternative investments that incorporate all investment strategies run with an orientation to producing primarily absolute returns using largely marketable securities.

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Hedge Funds Lecture 1: Overview

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  1. Hedge FundsLecture 1: Overview Ezra Zask Yale University September, 2005

  2. Definition • Investment approach • A sub-set of alternative investments that incorporate all investment strategies run with an orientation to producing primarily absolute returns using largely marketable securities. • Strategies typically include short-selling and often include leverage • As a result, correlations with broader markets are expected to be modest to low. • Legal Definition • Freedom from ICA (1940) controls on: • Leverage • short-selling • cross-holding • 10% limits • incentive compensation • derivatives positions • Limitations on: • number of U.S. investors (99 maximum) • solicitation of U.S. investors • public advertising and disclosure

  3. Institutional Allocation

  4. Allocation Methodology

  5. Impediments to Investing

  6. Institutional Assets

  7. Institutional Share of Assets

  8. Long Only Managers

  9. Structured Products

  10. Asset Class Allocation by Institutional Investors Source: NACUBO Endowment Study

  11. Strategy Allocation Source: Lipper/Tass

  12. Hedge Fund Location

  13. S&P Hedge Fund Strategies

  14. Strategy Definitions

  15. Fixed Income Arbitrage

  16. Convertible Arbitrage

  17. Merger Arbitrage

  18. Equity Market Neutral

  19. Distressed Securities Strategy

  20. Special Situations

  21. Equity Long/Short

  22. Managed Futures

  23. Global Macro

  24. Strategy Performance

  25. Strategy Performance (2)

  26. Style Risk Return

  27. Style Correlations 1/1994-6/2005

  28. CISDM Style Beta Analysis

  29. Hedge Fund Alpha

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