Brainstorm. Why Hedge Funds Earn More Than Others

Hedge fund
The main myth about hedge funds reads, that these are "black boxes" - closed and opaque, and none of the clients understands, where are their funds invested. How Hedge Funds Really Work and How They Provide High Returns?

The first hedge fund appeared in 1949 year. At the time, his functions were limited to hedging a portfolio of stocks with short positions., hence the name. Such tactics allowed successful funds to demonstrate performance, dozens of times outstripping the market. By now, the industry has evolved a lot - much more, than the finance industry in general. All technological innovations in the field of investment originate in hedge funds.

Now in hedge funds, there are about $3,5 trillion - this figure is comparable to the GDP of Germany and almost one and a half times the GDP of Great Britain. При этом приблизительно 50% assets are concentrated in the first hundred hedge funds, who make up a cohort of the most important names in the industry. For instance, at Bridgewater Associates now $122 billion, в AQR Capital Management — $70 billion, а в Two Sigma — $53 billion.

Hedge funds are widely known in narrow circles. Их клиенты — крупные институциональные инвесторы: pension and sovereign funds, insurance companies and other large financial institutions. Besides, hedge funds are popular with high net worth clients around the world, которые имеют возможность инвестировать в них через премиальные банки и фэмили-офисы.

Эти фонды интересны прежде всего своим соотношением риска и доходности. For instance, один из крупных и авторитетных алгоритмических фондов — Two Sigma Spectrum — за три года показал такую же доходность, что и фондовый индекс S&P 500, but with much less risk. В то время как американский индекс был крайне волатилен в некоторые периоды, hedge fund performance didn't just take a hit, but also grew. Если посмотреть на schedule with 2005 года — момента создания фонда, then you can see, что стратегия Two Sigma Spectrum значительно обгоняет индикатор S&P 500.

Доходность хедж-фонда Paloma Partners, which works with 1985 of the year, опережает показатель индекс S&P 500 on 1245%. Millennium Partners Foundation with 1998 года обошел американский индикатор на 815%, moreover, the maximum decrease in the entire history of the fund was only 7,4%. A hedge fund D.E. Shaw Valence c 1999 year earned 1261%, while S&P 500 including dividends grew by only 121%.

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This explains, why hedge funds are so popular with institutional investors, for whom stable positive profitability is important in the long term. Это фонды не просто обгоняют индекс, но и показывают чрезвычайно высокий результат на волатильном рынке. For example, во время краха доткомов начала нулевых и ипотечного кризиса 2008 года хедж-фонд Winton Futures показал доходность в 40% And 21% respectively.

"Quants" at the helm

Seven out of ten leaders in this industry with assets under management in $400 billion is algorithmic funds. Способность машин обрабатывать огромные массивы информации с фантастической скоростью привела к тому, that portfolio managers can no longer compete with them.

Every major foundation is run by incredible people. For example, Two Sigma hedge fund founded by David Siegel and John Overdeck. До этого они работали в D.E. Shaw, где в то же время трудился и Джефф Безос — глава и основатель Amazon.with. Actually, компанию Amazon Безос создавал вместе с Джоном Овердеком — тот был его правой рукой и впоследствие стал вице-президентом корпорации.

It is also worth noting the creator of the D.E fund himself.. Shaw - David Elliott Shaw. He graduated as a computer engineer, and in 1996 of the year, Fortune magazine named him the "quantum king" of the hedge fund industry. При этом Шоу не бросил свою научную деятельность и после 2001 began to devote more and more free time to computational biochemistry.

Algorithmic fund HR departments have long been competing outside of Wall Street, а с Силиконовой долиной — Google, Amazon and other tech companies. 80% employees of modern hedge funds are mathematicians and programmers. There are also portfolio managers, but they differ from classical financiers. У них скорее математический бэкграунд, и в большинстве случаев они умеют программировать самостоятельно.

These people develop strategies and models, экспериментируют, work with large amounts of information. Число стратегий Two Sigma достигает нескольких тысяч. Among them there are both long-term, so are those, which live for a few seconds. There are strategies, что основаны на фундаментальных данных, and there are those, who catch minor technical market deviations.

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Algorithmic strategies are more efficient. A person can manage a portfolio well from 40-50 Papers. Undoubtedly, each manager has his own approach and his own system, according to which he analyzes the facts and makes decisions, evaluates fundamental indicators, looks at paper dynamics from a technical point of view, communicates with company representatives, читает публичную информацию и так далее.

The algorithmic fund does almost the same thing., only in greater volume. Truth, the algorithm cannot communicate with people, but he handles any mentions of the company in the media, social networks and documents are tens of thousands of times more effective. What does it mean not only text documents, но и голосовые — у многих хедж-фондов есть свои программы распознавания речи. So, Two Sigma scans the entire background information on 70 Languages.

There are more amazing ways to get information.. For example, algorithmic hedge funds can measure customer activity using satellite imagery. Before, to understand, how many customers monthly came to Best Buy - a large American chain of consumer electronics stores - you had to stand near the doors to the stores and count the buyers. Сейчас информацию можно получить с помощью спутниковой съемки парковок перед гипермаркетами.

Modern technologies make it possible to literally dissect every company, to find out everything about her. Furthermore, они могут сделать это быстро и в широком масштабе. The system works 24 hours a day in all regions, analyzes everything, what is said, voiced and recorded, Checks, experiments and develops successful trading strategies. Undoubtedly, талантливые управляющие могут обойти хедж-фонд в экспертизе, но справиться с таким же объемом информации они просто физически не способны.

If Google collects information, to sell effective advertising, then hedge funds - to make money in the stock markets.

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The secret to efficiency

One of the main goals of most hedge funds is to neutralize market risks.. How can this be achieved? Briefly, then you need to balance each position. If Apple's paper is long (to purchase), то Nokia — компания из того же сектора, с похожими характеристиками, but significantly worse indicators, - will stand in shorts (for sale).

Другой пример — акции General Motors и Ford. The shares of these companies behave very similarly., and any serious deviation from the usual spread can be a signal for a trade. В этом случае арбитражный фонд будет продавать General Motors и покупать Ford, because, probably, котировки Ford или подтянутся к уровню Gеneral Motors, или стоимость бумаг General Motors обратно спустится к Ford.

Here is another example of this, как проходит подбор бумаг в портфель Two Sigma. Система оценивает каждую акцию по четырем типам параметров: фундаментальным, Technical, событийным и так называемым alpha capture — уникальным моделям компании. Только если система оценит бумагу достаточно высоко по всем параметрам — она попадает на рассмотрение к «управляющему». Но та же условная stock Apple не попадет в портфель, if there are several strong tech companies in the long. The hedge fund must balance this position with something..

It is thanks to this principle that algorithmic hedge funds manage to keep a fairly even return and smooth out its volatility.. In other words, it doesn't matter for the fund, where the market is heading. Падение цены одной бумаги или сектора очень часто будет уравновешено ростом стоимости другой бумаги или сектора.

Perhaps, лишь один миф развеять не получится — индустрия, really, extremely closed. Hedge funds themselves do not seek complete transparency. It is more convenient for them to work with large and proven institutional clients, so get, what is called, «с улицы» в хедж-фонд с громким именем невозможно, а через известного инвестиционного представителя — крайне сложно.

http://www.forbes.ru/finansy-i-investicii/355333-mozgovoy-shturm-pochemu-hedzh-fondy-zarabatyvayut-bolshe-ostalnyh

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