B.8 Additional Topics (1).pptx

B.8 Additional Topics (1).pptx - 1 Hedge Funds • Hedge...

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1. Hedge Funds Hedge funds vs mutual funds Strategies and styles Equity hedging 2. Indexing 3. Stock Dividends, Repurchases and Splits 4. Clienteles Additional Topics Venti - Additional Topics 1
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Hedge Funds vs. Mutual Funds Hedge Fund Transparency : Limited Liability Partnerships with minimal disclosure of strategy and portfolio composition Investors : No more than 100 “sophisticated” and wealthy investors Mutual Fund Transparency : Regulations require public disclosure of strategy and portfolio composition Investors : Number is not limited 2
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Hedge Funds vs. Mutual Funds Hedge Fund Investment Strategies : Very flexible, funds can act opportunistically and make a wide range of investments Often use shorting, leverage, options Mutual Fund Investment Strategies : Predictable, stable strategies, stated in prospectus Limited use of shorting, leverage, options Venti - Additional Topics 3
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Hedge Funds vs. Mutual Funds Hedge Fund Liquidity : Have lock- up periods, require advance redemption notices Compensation structure : Management fee of 1- 2% of assets and an incentive fee of 20% of profits Mutual Fund Liquidity : Investments can be moved more easily into and out of a fund Compensation structure : Fees are usually a fixed percentage of assets, typically 0.5% to 1.5% Venti - Additional Topics 4
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Directional Bets that one sector or another will outperform other sectors Non-directional Exploit temporary misalignments in relative valuation across sectors Buy one type of security and sell or short another Strive to be market neutral Hedge Fund Strategies Venti - Additional Topics 5
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There are many types of hedge funds. Basically four (very) broad categories: Equity hedge Classic “portable ” strategy Long-short Global Macro (Tactical) Pure directional Bets on interest rates, currency movements, stock, etc.
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