HEDGE FUND STRATEGIES Equity Long / Short: involves share based investing on both the long and short side of the market across a range of sectors, categories and regions. Represents largest amount of hedge fund assets. Highly correlated with market. Short Bias: Short sale of over-valued securities, by either selling borrowed stock or using derivatives to create synthetic shorts. Some of these dedicated short funds are among the first to foresee corporate collapses. Skilled at scrutinizing company fundamentals and financial statements. Event Driven Strategies Distressed Securities Merger / Risk Arbitrage Arbitrage Strategies Market Neutral Convertible Arbitrage Fixed Income Arbitrage Equity Arbitrage Mortgage Arbitrage European AIFs Qualified Investment Alternative Investment Fund (QIAIF) Retail Investment Alternative Investment Fund (RIAIF) Common Contractual Fund (CCF) Trust Specialized Investment Fund (SIF) 10. WHERE ASSETS ARE MANAGED New York still big wig.. Push for Miami? “Hospitable and tax-free environment” “Access to Europeans” Thanks politicians. Each One is Different III Capital Management RWC Partners – UK Based SkyBridge Capital Scout Ventures

1. HEDGE FUNDS
Alternative Investments, Types of Hedge Funds, and Hedge Fund Strategies

2. ALTERNATIVE INVESTMENTS
Alternative investment universe: traditional asset classes used in non-traditional
strategies
Alternative investment universe: non-traditional asset classes
Alternative investment markets encompass:
Hedgefunds
Venture Capital
Private Equity
Real Estate

3. ALTERNATIVE INVESTMENTS
Alternative investments carry:
• Additional diversification, premium yields for taking on different risks (liquidity risk,
information risk)
• Improved risk/return characteristics
• Alternative Asset managers possess flexibility to make investment decisions «skill
based» strategies
• Focus on absolute returns instead of relative returns: performing well in any market
situation

4. HEDGE FUNDS
No standard definition
• Ability to short the market, to leverage the portfolio to multiply gains, and to hold high concentrations of positions
• No industry-wide classifications of hedge fund strategies, each major industry group has its own classification system
Attractions
• Expectation of strong returns (historical data)
• Low correlations to traditional asset classes and ability to provide diversification
• Absolute returns / Traditional managers that have relative return orientation
Misconceptions
• All hedge funds are risky investments: many funds have low degree of risk inherent in their strategies.
• Hedge Funds are illiquid: not necessarily the case

5. STRUCTURAL ORGANIZATION
Structural Organization
-Role of a Prime Broker
-Other differences: fee structures, lock in period, redemption windows & side pockets
Key Participants and Roles
-Investment Managers, Board of Directors, Administrator, Transfer Agent

6. TYPES OF HEDGE FUNDS

7. HEDGE FUND STRATEGIES
Market Trend (Directional / Tactical) Strategies
• Global Macro
• Managed Futures/CTAs
• Emerging Markets
• Equity Long/short
• Short Bias

8. HEDGE FUND STRATEGIES
Global Macro: Aims to from changes in global economies, typically brought about by
shifts in government policy which impact interest rates, in turn affecting currency,
stock, and bond markets. Participates in all major markets using leverage and
derivatives.
- Highest returns, most volatile, & high correlation to stocks and bonds.
Market Trend: Managed futures are investments that allow the investor to access the
world's futures markets through commodity trading advisors (CTAs). Highly specialized
and focus on expertise. Futures and currencies – global basis.
-Reduced volatility, low correlation with traditional assets
Emerging Markets: Equity or fixed income, usually no shorting.

9. HEDGE FUND STRATEGIES
Equity Long / Short: involves share based investing on both the long and short side of
the market across a range of sectors, categories and regions. Represents largest
amount of hedge fund assets. Highly correlated with market.
Short Bias: Short sale of over-valued securities, by either selling borrowed stock or
using derivatives to create synthetic shorts. Some of these dedicated short funds are
among the first to foresee corporate collapses. Skilled at scrutinizing company
fundamentals and financial statements.
Event Driven Strategies
Distressed Securities
Merger / Risk Arbitrage
Arbitrage Strategies
Market Neutral
Convertible Arbitrage
Fixed Income Arbitrage
Equity Arbitrage
Mortgage Arbitrage
European AIFs
Qualified Investment Alternative Investment Fund
(QIAIF)
Retail Investment Alternative Investment Fund
(RIAIF)
Common Contractual Fund (CCF)
Trust
Specialized Investment Fund (SIF)

10. WHERE ASSETS ARE MANAGED
New York still big wig..
Push for Miami?
“Hospitable and tax-free
environment”
“Access to Europeans”
Thanks politicians.
Each One is Different
III Capital Management
RWC Partners – UK Based
SkyBridge Capital
Scout Ventures

11. WHAT HAS BEEN HAPPENING
The highs set in 2011
have been surpassed
Push to L Cap

12. EXAMPLE
Let’s take Bridgewater Associates and break down who they are.
The firm serves institutional clients including pension funds, endowments,
foundations, foreign governments and central banks.
Focuses on economic trends, such as inflation, currency exchange rates, and U.S. gross
domestic product.
The company divides its investments into two basic categories: (1) Beta investments,
whose returns are generated through passive management and standard market risk,
and (2) Alpha investments, whose goal is to generate higher returns that are
uncorrelated to the general market and are actively managed

13. Pure Alpha: Launched in 1989. Designed to balance risk among a variety of non-
correlated assets through active management. It includes 30 or 40 simultaneous
trading positions and has an average annualized return of 18%. Only lost money 3 of
last 20 years.
All Weather: Launched in 1996 and highlighted low fees, global inflation-linked
bonds and global fixed-income investments. High, risk adjusted returns. In April
after the collapse of Lehman Brothers, the fund moved into "safe portfolio" mode
which included nominal and inflation-linked bonds and gold instead of equities,
emerging market debt, and commodities.
Pure Alpha Major Markets: At the time, it was the largest hedge fund launch (2011)
with 7.5 billion to invest. An investment vehicle similar to the company's Pure Alpha
fund but with enhanced liquidity by focusing on the major markets such as
bonds

14. 3 Billion vs 150 B
buyback
Bill Ackman, a hedge fund manager was
shorting Herbalife saying that it was a Ponzi
scheme and Carl had the opposite view and
was buying the stock.
Can you imagine making nearly a billion dollar
bet that a stock is over valued?
1.
2.

15. LONG TERM CAPITAL MANAGEMENT
“Twenty years ago, one bond-trading hedge fund grew from launch to over $100
billion in assets in less than three years. It saw yearly returns of over 40 percent. But by
1998, that firm was primed to expose America’s largest banks to more than $1 trillion
in default risks. The demise of the firm, Long-Term Capital Management (LTCM), was
swift and sudden. In less than one year, LTCM had lost $4.4 billion of its $4.7 billion in
capital.”
• Almost collapsed financial system
• Positions at peak were over 1 Trillion
• Experts, aren’t always the biggest experts

16. BENEFITS SUMMARY
1. High level of expertise, tactical allocation
2. Lack of attention on your part, if need be
3. Tax efficiency
4. Lock In Periods, stay your course
5. Prestige

17. HEDGE FUNDS
Alternative Investments, Types of Hedge Funds, and Hedge Fund Strategies
By Chance Owen