Investment Strategies of Hedge Funds

Preface

The growth of the asset management industry was also fostered by the expansion of the range of products, honed to best satisfy the specific and diversified needs of investors.

In addition to traditional asset management products, such as mutual funds, so called alternative investments gradually grew in prominence. The main alternative investment products are hedge funds and funds of hedge funds, but they also include private equity and venture capital funds (Figure 0.1).

Alternative investments are characterized by a low correlation with traditional investments. Since the first hedge fund was launched in 1949 by Alfred Winslow Jones, the hedge fund industry has grown impressively reaching the size of $1.3 trillion and 8000 hedge funds. Often hedge funds are responsible for a big slice of the daily trading volumes of financial markets and they are counted among the best clients for brokers, given the level of trading fees they generate.

This exponential growth has led regulators to take a closer look at this phenomenon. The US Securities and Exchange Commission (SEC) has recently decided to increase the regulation requiring the registration of the investment advisors of the US hedge funds and the Financial Services Authority (FSA) already requires the investment advisors to be registered in the UK.

Nevertheless, this remarkable phenomenon is still surrounded by an aura of mystery. So, the goal of this book is to help readers to understand in detail the investment behavior ...