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Introduction to Hedge funds

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Introduction to alternative investing & hedge funds by Murray Priestley

Published in: Economy & Finance

Introduction to Hedge funds

  1. 1. Murray Priestley Founder & Managing Director älpha Holdings Management
  2. 2. • Alfred Winslow Jones in 1949 • Fund that bought long & sold short to “hedge” the portfolio • 670% return over 10 years (compared to the normal 358% for fund managers) Father of the Hedge Fund
  3. 3. Father of the Hedge Fund
  4. 4. 140 US Hedge Funds in 1968
  5. 5. US Hedge Funds Today 15,60 0Est. $2 trillion FUM
  6. 6. Styles of Investing
  7. 7. Arbitrage Simultaneously buy GOLD at $1000 in New York and sell GOLD at $1050 in London.
  8. 8. Convertible ArbitrageSimultaneously purchase convertible securities while shorting the stock.
  9. 9. Fixed Income ArbitrageInefficiencies in pricing bonds. “Picking up cents in front of a steam roller”
  10. 10. Statistical Arbitrage Mis-pricing of one or more assets. “Quants” Pairs trading based on moving in and out of correlation.
  11. 11. Distressed Taking advantage of bankruptcy by buying assets cheap Buy – Fix – Sell Buy – Unpack – Sell Pieces
  12. 12. Long/Short Equities Buying long and selling short
  13. 13. Global Macro Global indexes, interest rates and currencies
  14. 14. George Soros Made $1 billion during the 1992 Black Wednesday UK currency crisis
  15. 15. Managed Futures Trading Commodities
  16. 16. Modern Portfolio Theory
  17. 17. Risk vs. Return Diversification leads to higher return for less risk.
  18. 18. U Chart Get the best risk return ratio at the tip of the U-curve. Harry Markowitz, 1952
  19. 19. Performance 20% 30%
  20. 20. 20% 30% USD1,000 USD10,000 USD100,000 USD1,000,000 USD10,000,000 USD100,000,000 USD1,000,000,000 1978 1984 1990 1996 2002 2008 Buffet $3.4 Million Simons $474 Million Performance
  21. 21. Performance Stats CAGR% The year-over-year growth rate of an investment over a period of time. Max Drawdown The largest drop of a given asset within a certain time period. Sharpe Ratio A measure of the excess return per unit of risk in an investment asset
  22. 22. Backtesting Strategies Entry and exit rules Risk Correlation, position, total risk Money Management Risk per trade, equity curve Timeframes Trends occur 30% of time Portfolio Mix
  23. 23. Performance
  24. 24. Fund Advantages Larger time frames and more buying power.
  25. 25. No commitment. http://murraypriestley.com/ Register Your Interest Today!

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