Hedge fund legend George Soros, now 82, remains chairman of Soros Fund Management, the $24 billion firm that manages his personal fortune as well as the money belonging to his foundations. The firm’s recent and successful big bet against the yen was classic Soros. He returned the relatively little client money his firm managed in 2011, which was not a good year for him. His firm’s performance again trailed the U.S. stock market in 2012, but was firmly in positive territory. That was good enough for him to make $1.1 billion.
Definition of 'Hedge Fund'
An aggressively managed portfolio of investments that uses advanced investment strategies such as leveraged, long, short and derivative positions in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark).
Legally, hedge funds are most often set up as private investment partnerships that are open to a limited number of investors and require a very large initial minimum investment. Investments in hedge funds are illiquid as they often require investors keep their money in the fund for at least one year.
Investopedia explains 'Hedge Fund'
For the most part, hedge funds (unlike mutual funds) are unregulated because they cater to sophisticated investors. In the U.S., laws require that the majority of investors in the fund be accredited. That is, they must earn a minimum amount of money annually and have a net worth of more than $1 million, along with a significant amount of investment knowledge. You can think of hedge funds as mutual funds for the super rich. They are similar to mutual funds in that investments are pooled and professionally managed, but differ in that the fund has far more flexibility in its investment strategies.
It is important to note that hedging is actually the practice of attempting to reduce risk, but the goal of most hedge funds is to maximize return on investment. The name is mostly historical, as the first hedge funds tried to hedge against the downside risk of a bear market by shorting the market (mutual funds generally can't enter into short positions as one of their primary goals). Nowadays, hedge funds use dozens of different strategies, so it isn't accurate to say that hedge funds just "hedge risk". In fact, because hedge fund managers make speculative investments, these funds can carry more risk than the overall market.
Hedge funds are private, actively managed investment funds. They invest in a diverse range of markets, investment instruments, and strategies and are subject to the regulatory restrictions of their country. U.S. regulations limit hedge fund participation to certain classes of accredited investors.
Hedge funds are often open-ended, and allow additions or withdrawals by their investors. A hedge fund's value is calculated as a share of the fund's net asset value, meaning that increases and decreases in the value of the fund's investment assets (and fund expenses) are directly reflected in the amount an investor can later withdraw.
Most hedge fund investment strategies aim to achieve a positive return on investment regardless of whether markets are rising or falling. Hedge fund managers typically invest money of their own in the fund they manage, which serves to align their own interests with those of the investors in the fund. A hedge fund typically pays its investment manager a management fee, which is a percentage of the assets of the fund, and a performance fee if the fund's net asset value increases during the year. Some hedge funds have a net asset value of several billion dollars. As of 2009, hedge funds represented 1.1% of the total funds and assets held by financial institutions. As of April 2012, the estimated size of the global hedge fund industry was US$2.13 trillion.
Because hedge funds are not sold to the general public or retail investors, the funds and their managers have historically been exempt from some of the regulation that governs other funds and investment managers with regard to how the fund may be structured and how strategies and techniques are employed. Regulations passed in the United States and Europe after the 2008 credit crisis were intended to increase government oversight of hedge funds and eliminate certain regulatory gaps.
JPMorgan trader set to start hedge fund
MARCH 6, 2012 BY AGENCY REPORTER
A team of top proprietary traders at JPMorgan Chase & Co is set to launch what is likely to be one of the largest hedge fund start-ups in 2012, the Financial Times reported on Sunday.
London-based Mike Stewart, JPMorgan’s global head of proprietary trading and former head of emerging markets, is expected to start his own hedge fund, Whard Stewart, in the second quarter, the FT cited people familiar with his plans as saying.
Stewart’s emerging-markets trading team at the bank is expected to join him, the newspaper said.
JPMorgan had chosen Stewart to head a new Alternatives Unit within the bank’s asset management business. Fifty traders from JPMorgan’s three major proprietary operations were set to move to the unit as the operations faced closure because of the Volcker rule, the FT said.
US regulators have said the Volcker rule, which cracks down on banks trading with their own money, is unlikely to be finalised by a July deadline, but the threat of its implementation has encouraged some proprietary traders to set up their own funds.
JPMorgan’s global head of equity proprietary trading, Deepak Gulati, is now considering setting up his own fund, the paper cited people with knowledge of his thinking as saying.
Gulati was expected to move into JPMorgan’s asset management business with his team later in the year and officially his plans have not changed, the FT said.
The report added that Stewart is understood to be leaving JPMorgan on amicable terms but the bank will not invest in his new fund.
JPMorgan was not immediately available for comment.
A similar high-profile Volcker-rule-related spin-out was conducted in 2010 by two prominent proprietary traders at Goldman Sachs, Pierre-Henri Flamand and Morgan Sze, who raised $1 billion each, the Financial Times said.
Hedge funds set for Nigeria as economic indices favour growth
The rising price of crude currently at $117.8 per barrel and growing external reserves are creating opportunities for more hedge funds to come into the country.
Claims by government sources about an increase in the crude oil production to 2.7million in July bpd up from 2.34mbpd in April on the back of fewer disruptions and the completion of repairs in major oil
Fields, which experts said suggests that the contribution of oil to GDP growth will be strongly positive in H2 2012, is also seen as positive signs.
Specifically, the recent strengthening of the Naira, the increased volume in crude oil exports amidst high global prices which has led to significant rise in dollar reserves is also said to be attracting attention of foreign investors.
Projected increases in crude production in the third quarter from the present 2.7mbpd to 2.9mbpd in oil exports is expected to boost trade balances significantly and lead to further substantial increase in official reserves. Analysts believe greater reliability in Nigerian crude supplies has attracted buyers, particularly from Asia, leading to some recovery in spreads of Nigeria crude grades over benchmark Brent and vaulting India over the US as Nigeria’s largest trade partner.
Compared with developments in matured markets, the positive signals from Nigeria are seen as growth drivers that are likely to switch hedge funds in favour of Nigeria