Talk:Hedge fund

I can't believe

I can't believe someone would take such a move. Do people ever learn. Anyway, it always form a good story once they #REDIRECT get burnt. Quote "in financial markets, where hedge funds have been borrowing at lower short-term rates and lending out at higher long-term rates on the assumption that Alan Greenspan and the Federal Reserve have slain the inflation dragon and would do nothing precipitous to jeopardize their "carry trade." [1] — Preceding unsigned comment added by Wk muriithi (talk • contribs)

The View from the future

Am I the only one who thinks this line is at least odd (if not incorrect):

"At the beginning of 21st century it was regarded by some as a "fashionable" type of investing, since hedge funds saw large inflows of money during that time." Axamoto 14:28, 21 July 2005 (UTC)

It's a stupid POV line, see Wikipedia:Avoid weasel words. "regarded by some"? Oh really... who gives a shit?

Hurdles/HWM

Hurdles and Highwater marks definitely need to be spelled out here (by someone with a better financial literacy than I).

Also, side pockets.

The article could be improved by this -- hedgefunddot.

Recommend adding additional color on hurdles. For example, are highwater marks typically structured at a fund level or an investor level? In general, what portion of funds use a highwater mark vs. other hurdles?

Hedge Fund Managers

What is the point of the hedge fund managers section. There are over 8000 hedge funds, and thousands of managers manage them. What is the criterion to get on the list? Jim Cramer, for example, doesn't even manage a Hedge Fund any more? Awormus 21:49, 4 February 2006 (UTC)

I do agree - it is really a daunting task to decide. --Bhadani 16:42, 3 March 2006 (UTC)

Agreed - It has the potential of becoming a big can of political worms, with all HF managers listing themselves and deleting their competitors. --RanBato, 07:06 5 May 2006.

I disagree, a list (albeit incomplete) of hedge fund managers provides valuable and germane information to readers.--wescbell, 12:48 31 May, 2006.

List the top ones for each year only is the solution. Hedge Fund ranking for 2005. Who where the top Hedge Fund managers of 2005 [2]

Trade2tradewell 17:16, 27 January 2007 (UTC)

Macro Funds

I noticed that Macro Funds (such as Soros' itself) where not included as a Hedge Fund Class. Shoudn't they be included?

Good point. I just added that class, under the usual name "Global macro". Turning that red link blue will have to be a task for another day though. --Christofurio 02:13, 4 March 2006 (UTC)

Sentence with no ending

"While most of today's hedge funds still trade stocks both long and short, many do not trade stocks at all and the term hedge fund has come to mean a"

Why does this sentence simply have no ending?

This sort of stuff looks really bad..

Just do it! — Subsolar 00:59, 21 February 2007 (UTC)

Article lacks critical perspective, reads like industry handout

I think this article is problematic in several ways, and overall reads as if it were written by a hedge fund trade association.

For example, early in the article is a reference to a study of incentive fees that examined mutual funds,, not hedge funds, and went on to editorialize that larger hedge fund fees are good.

I have removed the above, erroneous reference and also added a section on criticism of hedge funds, which the article sorely needs. I hope others can expand on that section and fix this article generally.--Mantanmoreland 20:29, 19 May 2006 (UTC)

criticisms

Deleted the sentence: "Other criticism involves potential hazards posed to investors. These concerns relate to hedge fund insolvency as the result of: market setbacks, the negligence of management, or even, in some widely publicized instances, outright criminality." to the extent such criticisms exist they're not only uninformed, the miss the point that hedge funds are lightly regulated precisely because people with sufficient assets to invest in them are generally sophisticated enough (or have access to sophisticated advice) on those risks, and in any case market setbacks, management negligence and outright criminality are in no way specific to hedge funds. All financial investments, even putting money in a cheque account, involve all of these risks. These "hazards" are called "risks". There is no reward without risk. ElectricRay 22:40, 14 June 2006 (UTC)

Link not working

The link "How to Set Up Your Own Hedge Fund and Due Diligence, Disclosure and Fund Managers - by Hannah Terhune, JD LLM (Taxation, New York University)" seems not to be connecting to the server right now, does anyone else have this problem? I'm going to give it a few days then take it off. If someone has a reason not to do this, please let me know! 1:28 am CT June 19th 2006

SEC Add

I cant tell reading the section about govt regulation where the SEC presently stands.

As I understand it , the SEC lost a case litigating whether or not SEC rules were ok requiring hedge funds to be registered with the SEC ; AND , just yesterday, the SEC stated it would not appeal that federal court decision.

SO, the SEC does NOT require hedge funds presently to be registered and can NOT by that recent federal court case.

See

• SEC wont appeal federal court overturning SEC's hedge fund rules

,,,,bigwilly2hedge,,,,

Update, Hedge Fund Crashes section

see today NY Post http://www.nypost.com/business/hedge_funds_flameout_may_scuttle_abn_deal_business_zachery_kouwe.htm

see this weeks New York: Angelo Hagiligannis wipes out $180 million hedge fund and then disappears .... http://newyorkmetro.com/news/businessfinance/23171

Angelo is one of the 1000s of Hedge Fund managers with clown level experience having only 1 year experience as only a broker assistant at Merrill Lynch

Where were Hedge funds?

Where were hedge funds designed to make higher returns during the advance of the DJIA from 1,000 to 11,700 from about 1988 to 2000 ???

And where was your regular brokerage firm as Merrill , Goldman, Soly, Morgan Stanley, First Boston, Lehman --- none of them either hedge funds or major Wall Street firms made like anything during this most major rally in history... what they did make was pitling small when with levereage any of them - hedge funds or major firms - should have been making then and now 10 +++ billion per year in profits ... which one did ???

NOT A SINGLE FRKG ONE none of them... does this clue you in to how pitiful they ALL are ????

- and your point would be? ElectricRay 13:28, 4 December 2006 (UTC)

! markit pro

add transparency section

the special reason for SEC , regulator concern, would be the heavy "touting" by hedge fund managers of facts simply not only untrue but clearly fraud... as done by one of the largest funds out there, (over 10 billion, top 5 hedge fund) ,,,,eye witness-gintwillysr (< not touting , factual ?),,,,

Funds of Funds

The funds of funds listing has been removed several times, I am personally against needing to list the funds (especially since most of the external websites being linked to hold no information. However they have been removed several times for no apparant reason, so we should come to an agreement about their place on the page. Awormus 20:11, 4 September 2006 (UTC)

Limited Partnerships???

Ummmm...rubbish. Many US HFs are LLCs. Most overseas are LTDs. This is to say nothing of the abundance of SPCs. HedgeFundBob 13:16, 21 September 2006 (UTC)

- completely agree - have removed this reference from the introduction. ElectricRay 13:28, 4 December 2006 (UTC)

hedge fund

hi there would you tell me please, if hedge fund gaurantee an activity?

i will if (a) you sign your post and (b) your post makes grammatical sense. Right now, it doesn't. ElectricRay 13:28, 4 December 2006 (UTC)

News Articles?

Are newspaper articles properly included in these pages? They do not add anything to the content, and quickly become outdated. Shouldn't they be removed?

Error or otherwise unclear section

In the section "Equality long short", there's a paragraph about risk metrics (presently the one before the last). It reads "Net exposure is long exposure less short exposure and in our example above would be 100 - 50 = 50 USD or 50%.". Shouldn't it be "[...] 150 - 50 = 100 USD or 100%."?

LMB 14:02, 11 November 2006 (UTC)

Example on How Fees are Charged is Confusing

Misterwiki39393 02:39, 21 November 2006 (UTC)

I was very confused by what is written below about how fees are charged(copied from the article). Can somebody give an example with a real dollar amount? For example, suppose somebody invests $1000 and it goes up 20% in 1 year. How much is the management fee, and how much is the performance fee? You mention a 2 and 20. Is the 2% a percent of $1000, $1200, or some other number? And where does the 20% come in? Is that supposed to be 20% of 200, or does the 2% come off first?

"The typical hedge fund charges what is known in the industry as 2 and 20 by which is meant that management fees are 2% per annum and performance fees are 20% of whatever returns are generated. All these fees apply to gross asset values and gross performance."

"Assume that a hedge fund returns 15% in a year net of all fees. This means that the gross returns must add back the 2% management fee and adjust for the 20% share of gross returns that accrue to the hedge fund manager."

"Gross returns are therefore (15% + 2%) / (100% - 20%) = 21.25%. Total fees to the hedge fund manager are therefore 21.25% - 15.00% = 6.25% Net returns to the investor = 15% "

"many hedge funds do not trade stocks at all"

For some reason this was tagged with a label. Across the hedge fund space there are whole categories of fund managers which don't trade equities: credit funds, emerging market debt funds; Commodity Trading Advisers (aka Managed Futures); ABS funds... there is no need for a citation to back this statement any more than there would be to say "men and women compete in golf tournaments" - it's simply true. ElectricRay 12:58, 4 December 2006 (UTC)

Completely agree. There tends to be a bit too much citation tagging on Wiki generally simply because the taggers aren't familiar with the field. Understandable, but there is no need for a citation here. Using the knowledge base of the general public is what Wiki is all about, surely? 80.229.27.145 09:18, 14 April 2007 (UTC)

Tidy Up Intro

I have tidied up the intro. ElectricRay 13:29, 4 December 2006 (UTC)

Mind if I take another shot? Servalo 22:02, 8 January 2007 (UTC)

Err, better not try any formating I guess. Servalo 22:04, 8 January 2007 (UTC)

Various changes, advice please

I've made several changes to introduction and FoFs. The changes are incomplete (eg unreferenced) and there are several other sections I plan to work on -- particularly performance fees, which for me are the key HF concept -- but I'll give it a rest for now as I've a rather shaky grasp of the wiki approach and advice would be welcome.

1) The article looks a bit long to me. Wouldn't it make more sense to have the strategies sections (eg L/S equity) just referencing the relevant pages rather than duplicating them?

2) The regulatory section is quite specialised, not key to the topic, and rapidly changing. Maybe better as a separate entity? (Page? Not sure this is the correct term)

3) The criticism is of mixed quality. "Questionable propriety" is specific but not very informative; "Go-anywhere approach is an invitation to mischief" is true (and charming) but not very specific; while the fees section is vital but at least in part would be better incorporated into the defining properties. Does the article need a criticism section if the other sections are balanced appropriately? Servalo 00:24, 9 January 2007 (UTC)

4) Added sections on fees and structure, with material from Origins and Criticism. Intention is to merge Flows and levels into Origins and put the comparison sections lower down, perhaps with the regulatory material.Servalo 17:55, 11 January 2007 (UTC)

Opening paragraph

In the opening paragraph the article says that hedge funds are "unlike mutual funds," but then in the second paragraph it says that an example of such retail funds "are mutual funds." Am I missing something, because this seems like an incontiunity. RENTASTRAWBERRY ^{FOR LET?} röck 01:24, 17 January 2007 (UTC)

But it says that hedge funds are precisely NOT retail funds. Typewritten 14:18, 22 January 2007 (UTC)

This is all a bit of a mess due to conflicting edits. US retail funds are called mutual funds. HFs are compared to both in different places; personally I'd prefer to standardise on "Retail Fund" (see US Bias below). Servalo 17:41, 26 January 2007 (UTC)

Hedge funds and accredited investors

In the "Comparison to U.S. mutual funds" section, I believe the following statement is incorrect:

"A hedge fund investor must be an accredited investor..."

I have just began studying hedge funds and noticed that while most hedge fund managers choose to go with accredited investors, this is not an absolute requirement, although it may be the norm. It seems to have something to do with disclosure requirements. The Capital Management Law Group states that "Offerings made to 'accredited investors' exclusively are exempt from disclosure requirements under Rule 506." It also states that "Of course, the hedge fund may wish to allow non-accredited investors into the fund, in which case it will not be exempt from disclosure requirements." Hedge Fund article by Capital Management Law Group Gaytan 06:59, 25 January 2007 (UTC)

Its more fundamentally incorrect than that: "accredited investor" is a legal term that only applies in the US (though similar concepts exist most places). My opinion is that restricted availability to investors is so common among HFs that it is a defining feature, but as with everything else in this field there are a few exceptions. For example in Japan there are a handful of retail funds with all the other properties of hedgefunds, and I'd call them hedgefunds. Just as there are a small percentage world wide that don't charge performance fees. Servalo 17:41, 26 January 2007 (UTC)

US Bias

A lot of the material on this page is written from a US perspective. We should not assume that the SEC and NASD are relevant regulators or that Mutual Funds are the name for retail funds. Both are true for the US but not for the rest of the world, and it would be better to use generic terms such as "Regulator" and "Retail Fund", particularly in the introduction. Perhaps also better to move the country-specific stuff to separate pages? Servalo 17:41, 26 January 2007 (UTC)

Perhaps we need to have a hedge fund (US) page that is separate? Or parse out US vs. foreign? Or do a compare/contrast section? I'm amenable to any ideas. Netsumdisc 19:24, 26 January 2007 (UTC)

US is such an important part of the field that it should have discussion, its mainly a question of where. I think the article is a bit long and "Regulatory developments" sections is pretty technical for the main article, so how about a separate page "Hedgefund regulation" to hold all the US and UK stuff? It could also hold the US-specific material from the "comparison to" sections, I should be able to add stubs for Dublin, Luxembourg and Switzerland.

Not sure if thats the best approach, but I'd definitely keep country-specific stuff out of the intro. Servalo 11:08, 29 January 2007 (UTC)

OK, moved regulation into a single section for now. Could maybe shift it into a separate page. Haven't yet removed US stuff from intro because the regulation section is too legalistic to replace it. I'd like to write "why do they exist", "what do they do", "what goes wrong" and "why everyone hates them" rather than referencing 3(c)7, but that will have to wait for another day 8-) Servalo 19:34, 29 January 2007 (UTC)

It needs to be noted that some funds are regulated by the CFTC if they trade futures in volume.--Samiharris 16:06, 1 February 2007 (UTC)

There is a distinction between the approach that hedge funds take to regulation (i.e. avoiding it), which is common across all jurisdictions, and the specific consequences of that approach in each jurisdiction. The general sections should set out the general principles, and the details should be set out in the regulatory section. Having US-specific content in the general sections is both confusing and inaccurate.

There is also some distinction between the regulation that applies to an investment management company carrying on investment activities in a jurisdicton, and the regulation that applies to a fund when attracting investors in certain jurisdictions. The consequence is that lawyers setting up UK-managed funds spend a lot of time considering SEC regulations (and I assume the reverse is true of US-managed funds seeking overseas investors). So it is not simply a question of saying "US funds need to think about the SEC etc, UK funds need to think about the FSA" and so on. 86.135.93.25 21:16, 25 March 2007 (UTC)

"There is a distinction between the approach that hedge funds take to regulation (i.e. avoiding it), which is common across all jurisdictions..." 8-)

The US is important because their rules are uniquely extra-territorial. All other regulators, AFAIK, are content with an "Offshore = dangerous" warning. Servalo 20:11, 30 April 2007 (UTC)

Distinction between hedge funds and hedge fund management company

The IPO of Fortress calls attention to the article being weak in making the distinction between hedge funds and hedge fund management companies.--Gkklein 03:08, 11 February 2007 (UTC)

That is a very very good point. One management company can have several or many hedge funds. Merrill Lynch and the large wire houses have many funds, whereas smaller hedge funds otherwise. Many have domestic and overseas funds in one management company. I added a sentence under "legal structure," but of course that can be expanded.--Samiharris 17:10, 11 February 2007 (UTC)

This article continues to chase its tail by using the sloppy "hedge fund=investment adviser" language typical of the generalist press. Example: The House "passed a bill that would allow states to oversee hedge funds and other investment advisors..." We are defining the term to mean the pool of capital--the fund--which I think is absolutely correct given the facts of the legal structure. Adherents of the outmoded use of hedge fund are using the phrase to refer to outfits like D.E. Shaw, which has a slew of other financial services endeavours going on, such as, I believe (not affiliated in any way with them), private equity, real estate and market making. And if D.E. Shaw is a "hedge fund," then why not UBS? UBS is the investment adviser to a large number of hedge funds.

"Hedge fund=investment adviser" gets absurd when one starts to talk about, e.g., registration. A registered hedge fund is a FUND that is registered under the 40 Act and sometimes under the 33 Act. Its adviser must be registered under the Investment Advisers Act. And there have been various proposals to REQUIRE hedge funds in the sense of FUNDS to register under the 40 Act and their advisers to register under the Investment Advisers Act. The SEC uses the term "hedge fund" in the way I suggest it should be used.

I think that the use of the "hedge fund=investment adviser" sense of hedge fund is unsophisticated and logically wrong and I think it should be challenged here. 72.88.211.95 (talk) 14:23, 11 April 2010 (UTC)

Link to Spanish language website

A link to a Spanish language website, http://www.fondosdeinversionlibre.com, was placed in the links section of this article recently. I do not speak Spanish and I don't think it is correct to use a website in the English Wikipedia. Unless someone can provide a reason to keep this link, I will remove it.--Samiharris 15:51, 20 February 2007 (UTC)

I say delete. Subsolar 00:51, 21 February 2007 (UTC)

How does it really ensure security??

Hi..Can somebody tell me how this hedge funds bring security..I am not really clear about the basics

If you want you can mail your reply to deba_842003@yahoo.co.in. —The preceding unsigned comment was added by 220.226.10.73 (talk) 09:14, 6 March 2007 (UTC).

You may want to try one of the many good websites devoted to hedge funds, such as are listed in the external links. Good luck.--Samiharris 00:38, 7 March 2007 (UTC)

Hedge fund index section

I have a problem with the section entitled "Hedge Fund Indexes." This section does not cite its sources and contains statements concerning several proprietary hedge fund indices that are dubious. You have, for instance, the old bugaboo about survivorship bias whereas I do believe this issue was resolved in all current indexes. This section needs work and sourcing.--Samiharris 15:00, 12 March 2007 (UTC)

Personal opinion is that it has been addressed but not resolved. The incentives are too high. I keep meeting "new" funds with 2y track records, and while I do backfill and survivorship biasses are alive and well. Servalo 20:15, 30 April 2007 (UTC)

I reckon the whole section looks a bit like an advert, and is probably too long for this article in any case... Art Markham 16:20, 17 October 2007 (UTC)

Terminology

The terms "alpha", "pure alpha", "static beta", and "alternative beta" are used in the article but never defined, nor is there a link to an explanation. I see that there is an alternative beta article that could be linked to, but that article does not shed much light on the topic for me. --Honestshrubber 21:24, 12 March 2007 (UTC)

The article for alpha is Alpha (investment). You are right. This article has a number of problems and one of them is failure to define terms or link to term definitions. That can and should be corrected.

I added an internal link to Alpha. In browsing through this article, I agree that there is far too much jargon and far too many technical and unexplained concepts.--Samiharris 23:40, 12 March 2007 (UTC)

An article on such an intensely commercial field is always going to be difficult to edit as most of the best-informed contributors have some axe to grind. Defining all terms would make the article unwieldy, there are so many. Removing jargon is tough to do in a neutral way, much of the jargon is important to someone. US bias is deeply ingrained. Ho hum, keep up the good work 8-) Servalo 08:30, 4 April 2007 (UTC)

There are worse. One on Short and distort extracts the most mileage from a neologism. Once I started an article on Jack Sandner, one of the leading figures in futures trading in the last half century, and was told he might not be "notable." Finance article in general are a mess.--Samiharris 18:27, 11 April 2007 (UTC)

Mutual Fund and Hedge Fund

A little bit confusion about captioned two funds

Is the Hedge Fund kind of Mutual Fund, but its not subject to any regulation by SEC.

Or they are tow different investment funds

thx —The preceding unsigned comment was added by A2046xu (talk • contribs) 14:17, 26 March 2007 (UTC).

The Hedge Funds are different from the Mutual Funds. The regulations that apply to Mutual Funds (U.S. Investment Company Act of 1940) do not apply to Hedge Funds. Put differently, when a Hedge Fund is formed, the lawyers carefully scrutinize the documents to make absolutely sure that the fund will not accidentally come under regulation as a Mutual Fund. They are legally two different animals. (Like married persons versus single persons, or like U.S. citizens versus non U.S. citizens). The precise criteria for exemption from the Investment Company Act are specified in the Act itself. Encyclops 02:45, 1 April 2007 (UTC)

Linking to External Hedge Fund Sites

Should we even have Hedge Funds links pointing to websites which by law cannot contain any information without protected with a password? Investors who want to access the information, generally have to be "Qualified Clients" (worth over 1.5million). IMO it's not worth the trouble pointing to the sites.

If the Hedge Fund is large enough to be worth it, then a wikipedia page should be created for the Hedge Fund

Or if it is widely known about rather than being obscure?

(Please sign your posts)

I agree. In particular these links are often added by anonymous or new users, and I suspect they may be more interested in promoting the funds than in improving the article. So I'd like to propose the rule: *no* direct external links from this page, just link to notable funds within WP. Subsolar 08:02, 11 April 2007 (UTC)

Here is my interpretation of some criteria from WP:External Links for the links to the sites of particular hedge funds:

3. Links mainly intended to promote a web site -- seems to be the main motivation for adding direct links

4. Links to sites that primarily exist to sell products or services -- true for most fund sites

6. Links to sites that require payment or registration to view the relevant content -- true for many sites

7. Sites that are inaccessible to a substantial number of users -- this is true for many sites where you must be either a resident of a particular country, or have substantial liquid assets to view most of the content.

So I am now going to remove these links, and I would ask people to comment here if they feel any additions are justified.

I think it's appropriate for Notable funds to have their own entry and for that entry to link to their home page.— Preceding unsigned comment added by Subsolar (talk • contribs)

I agree with you 100 pct. There are far too many links that are little more than spams. Please remove, and I will too.--Samiharris 19:05, 22 April 2007 (UTC)

I'm in favour. There is no real need for a "notable hedgefunds" or "top earners" sections -- no-one who comes here to learn about HFs actually needs these links. There is something of a grey area around the indices, magazines and academic sites like Edhec and AIMA, but the page won't ever read like more than an ad unless we chop out of pages of crud... oops, hadn't noticed that they had already gone!

I'd suggest removing "Top 25 funds of hedge funds by assets" as well. Servalo 20:47, 30 April 2007 (UTC)

I have a list of all the hedge fund associations in the US here: http://richard-wilson.blogspot.com/2008/03/hedge-fund-associations.html - could this get added to this page on hedge funds? —Preceding unsigned comment added by Rich4495 (talk • contribs) 21:27, 18 March 2008 (UTC)

"Hedge funds in..."

It'd be really useful to understand what a hedge fund is in certain contexts. For example, I arrived at this article because I don't understand what a hedge fund is in the context of political campaigning, what some of the criticisms are, etc.

I would go wild over having sections like that, including "common criticisms" and other subsections of the contexts I mention above. Ironiridis 01:21, 27 April 2007 (UTC)

Great objectives, but hard to meet. There are no accepted definitions, so anything you say has exceptions. Two general guides:

1) Assume any reference to Hedgefunds is a) hostile b) pejorative c) envious d) all of the above.

2) One defn I liked was "Hedgefunds are ultracapitalists". This encapsulates a lot of the politics and economics. Servalo 20:42, 30 April 2007 (UTC)

Hedge Fund Replication

There is now some research about passive replication of hedge funds which I think that should be included in this article. There are basically two approaches: (1) Synthetic funds : Kat and Palaro's approach ( http://www.fundcreator.com ) (2) Factor models: Goldman Sachs ART, Merril Lynch Factor Index and AlphaSwiss Alternative Beta

There is some discussion about these models here: http://allaboutalpha.com/blog/category/hedge-fund-replication/ —The preceding unsigned comment was added by 86.135.124.124 (talk) 20:10, 7 May 2007 (UTC).

It is an area of research. Personally I think its a bit technical for the main HF article, its hard enough to write well on what HF are without introducing approximants, extracts, synthetics and their various problems. Perhaps a separate page? Servalo 21:29, 7 May 2007 (UTC)

There is now a dedicated Hedge Fund Replication page, which covers the approaches of the various methodologies. This page uses the website www.hedgefundreplication.com for its source material. —Preceding unsigned comment added by 79.123.62.50 (talk) 12:55, 22 December 2009 (UTC)

US centric

This article is far to US centric. US specific parts should be extracted to a separate page

In an ideal world I'd agree, but a set of internationalising edits ("SEC" => "regulator" etc) were reverted very quickly. I'd guess most editors are American. Perhaps a pragmatic approach is to insert "in the US" for the specific stuff? Servalo 20:35, 17 May 2007 (UTC)

Hi, I am new contributor to Wikipedia. I am a Hedge Fund advisor, and I can share 1-2 paragraphs of information and trends on Hedge Funds outside US, especially London which is a big hub. Will that be helpful for this page? Let me know. Thanks. (AVSB (talk) 11:23, 19 November 2007 (UTC))

Recent events section needed

Hedge funds are in the news almost daily so some kind of "recent events" or similar section would be very useful.--Samiharris 15:33, 5 July 2007 (UTC)

Category:Hedge funds

I've just been looking through this category, and it seems to be a bit of a magnet for vanity articles. Perhaps people with more knowledge that I can have a look through at prod or AFD any non-notable companies? For example, I see no assertion of notability in Old Hill Partners Inc., Pacific Alternative Asset Management Company, or Medallion Fund (unlike Amaranth Advisors which clearly does assert notability, for example), but could an expert have a check? Cheers, DWaterson 14:34, 24 August 2007 (UTC)

Unrelated to the observation above, I believe there should be a new, separate category for Funds That Failed. I realized, when researching a defunct fund, MotherRock. What say? Nshuks7 (talk) 23:10, 20 December 2007 (UTC)

Sure, why not? But I think the name of the category might require some tinkering. Maybe "Defunct Hedge Funds."--Samiharris (talk) 14:57, 21 December 2007 (UTC)

Introductory paragraph

I think that the introductory paragraph could be made more useful. It should be a broad desciption of what hedge funds are about, that can stand on its own if necessary. I don't think that it quite does at the moment. They're difficult things to define, but I thought I would make a start at an alternative - please make comments/suggestions, particularly in respect of whether this description is also accurate for US hedge funds:

"A hedge fund is an investment fund structured to avoid direct regulation and taxation in major countries and which typically charges a performance fee. Being unregulated, a hedge fund is able to make greater use of derivatives, leverage and investment strategies such as short selling, and investing in a hedge fund is therefore thought to carry more risk than investing in a regulated fund. The assets of a hedge fund will usually be managed by a regulated investment management firm based in a major country."

Art Markham 15:13, 21 September 2007 (UTC)

"Unregulated" is a controversial way of referring to hedge funds. They are largely unregulated, but there are some regulatory requirements. Perhaps some other terminology could be used, and the comparison point in the paragraph could be to mutual funds. Not every hedge fund is managed by a regulated manager. Many are not. --Samiharris 03:07, 27 September 2007 (UTC)

I wouldn't say controversial, but perhaps a bending of the truth for the purposes of brevity, as all funds that I have dealt with (as a trainee funds lawyer) have been Cayman-incorporated companies that are unregulated in major countries, certainly in direct terms. Are US LP funds regulated in the US in any way? If we say "largely unregulated", does that suffice for the opening paragraph? I'm happy with "mutual fund", though the article here deals with US mutual funds, rather than the generic term, and the generic article is broad enough for hedge funds...

Regarding the investment manager - I am aware some are not, but I struggle to recall any by name - I assume all US-based fund managers are regulated? I'm happy with "usually" in that context, unless someone has the stats to show otherwise. This is just a summary of generalities, after all.Art Markham 19:52, 27 September 2007 (UTC)

Art, Polishing up the introductory para is a great idea, particularly on a sprawling and complex page like this, and I've no real problems with your proposal. Personally I would perhaps emphasise perf fees more -- they are the closest to a defining characteristic that I can see --and I'd also suggest that the greater risk is real rather than just perceived!

Samharris, I think "Unregulated" would do for the introductory para, which has to be concise. Servalo 07:49, 9 October 2007 (UTC)

There's no need to oversimplify. As it reads now is accurate. One could say "largely unregulated" if one wanted to do so.--Samiharris 19:11, 9 October 2007 (UTC)

Well, I've changed the whole introductory section. I think it is now all sufficiently conceptual and generic and covers all the key points without being country-specific, but it's by no means definitive so feel free to amend... Art Markham 16:41, 17 October 2007 (UTC)

Gross Asset Value

Can you pls tell me - When are the Gross Asset Values calculated or published ( made public ) ?

As in case of Mutual funds we get a daily updates on chaging NAVs, but for Hedge funds what is the time in a year when they report their gross performance.

Or putting it simply what time during the year a typical Hedge Fund will charge its Management & performance Fee. —Preceding unsigned comment added by 38.99.205.174 (talk) 16:21, 17 October 2007 (UTC)

I've never heard the term "gross asset value" used for a hedge fund (which is by no means to say that it isn't used...). Typically a hedge fund will pay its performance and management fees annually, quite often for the year ending 31 December. It will be based on the NAV at that time (or in the case of the performance fee, the increase since the previous 31 December). However, the NAV will usually be published monthly, when investors can also subscribe and redeem their investment. But this is only what is typical in my experience, and it all depends on the fund in question. Art Markham 16:39, 17 October 2007 (UTC)

Fees are usually accrued monthly, so the published NAVs are always "Net of fees". The date when the performance fee is paid usually makes little difference. Performance gross of fees is not usually stated, so if you want to work it out you would need to read the fund documents to find out the details of the fees and then add them back to the NAVs. Servalo 11:51, 2 November 2007 (UTC)

Organisational structure

I was wondering whether it might be worth having a small section on the organisational structure of the hedge fund's service providers. It might be getting a bit too "nuts and bolts", but let me know what you think. This is quite a rough draft:

Organisational structure

As a hedge fund has no employees or assets (other than its portfolio and an amount of cash), all of its functions are performed by service providers. The primary service providers are as follows:

Investment manager – the investment manager manages the investment of the fund's assets.

Distributor - the distributor is responsible for marketing the fund to potential investors. Frequently the distributor is also the investment manager.

Prime broker – prime brokerage services include lending money, acting as counterparty to derivative contracts, lending securities for the purpose of short selling, trade execution, clearing and settlement. Prime brokers are typically large investment banks.

Custodian – a custodian holds the legal title of the fund’s assets on behalf of the fund. The custodian is often also the prime broker (or its affiliate), and may control the flow of capital in order to meet the prime broker’s margin calls.

Administrator – the administrator typically deals with the issue and redemption of interests and shares, as well as calculating the net asset value of the fund. In some funds, particularly in the US some of these functions are performed by the investment manager, a practice that gives rise to a potential conflict of interest inherent in having the investment manager both determine the NAV and benefit from its increase through performance fees.

Art Markham 18:40, 17 October 2007 (UTC)

I like it. Servalo (talk) 09:19, 25 November 2008 (UTC)

Too many external links?

Do we really need eleven links under "Industry News"? That seems somewhat excessive, akin to linking to every single UK national newspaper in an article about a British event. WP:EL says that "[External links] should be kept to a minimum. A lack of external links, or a small number of external links is not a reason to add external links." Eleven seems much more than "a minimum". 86.136.251.18 14:32, 20 October 2007 (UTC)

I would certainly not object to you removing less important links. I haven't looked at them myself, so don't know which are useful. On principle, I would prefer to see up-to-date objective data stay and to see opinion to go, except perhaps if there are two or three major competing hedge fund news sources selected. Art Markham 13:06, 23 October 2007 (UTC)

I think the IP is making a good point. There are far too many links and the notable hedge fund companies smacks of OR.--Samiharris 14:45, 24 October 2007 (UTC)

Word "host" in the intro"

Small point, but seeing as I made a direct revert I thought I would explain. Someone amended the first sentence to read "A hedge fund is an investment fund structured to avoid direct regulation and taxation in major host countries". I think that "host" is incorrect - the fund is structured to avoid regulation anywhere where there is heavy regulation. If the fund is a Cayman company, it is structured that way in order to avoid regulation in the USA, Europe and wherever, not specifically to avoid regulation in the Cayman islands. I think "host" maybe only makes any sense if the fund is a US LP(?). Art Markham 13:14, 23 October 2007 (UTC)

Time to restructure?

This is a big article, containing several different types of material. I wonder if it would help to break it down into several pages, with Hedgefunds linking to pages that focussed on (say) Trading Strategies; Performance Fees; Regulation and Domicile; Reputation; and Notable Hedgefunds? The main page could then be reduced to just an introduction to each. I hope this would make the Hedgefund article would be more focussed, and easier to maintain and read. Servalo 11:39, 2 November 2007 (UTC)

There is something to be said for this. At the moment I still think that the page needs some work (the regulatory section needs some work from non-US people and the intro is clearly not settled (see below)), and maybe it would be better to settle the page down a bit before splitting it because otherwise we just put the same problem onto multiple pages. I think the page is still smaller than some and not too unwieldy, though I expect that some parts have capacity for expansion in the future so if other people wanted to split it now, I would be happy enough to go with that. Art Markham 19:19, 5 November 2007 (UTC)

Intro rewrite

I've substantially rewritten what had become a highly misinforming introduction.

A couple of examples:

Reason for existence: Someone amended the first sentence to read "A hedge fund is an investment fund structured to avoid direct regulation and taxation in major host countries." This is clearly highly POV, not to mention ill-informed. Hedge funds are more accurately and financially-informing when labeled as absolute return funds. They exist to make money regardless of market conditions. Being "structured to avoid direct regulation and taxation" does not in and of itself make money, and that's obvious on the face of it.

Secrecy: The section was previously ignoring the fact that it would be illegal to release hedge funds' private information such as returns, etc. to the general public.

My intent in the rewrite is to inform. I would hope that future editors will avoid the temptation to push some sort of anti-hedge fund bias, particularly if it is ill informed.

--24.28.6.209 14:16, 3 November 2007 (UTC)

The comment regarding regaulation/taxation is not POV - either it is true that they are structured that way or it isn't, and that is how all hedge funds are structured in my experience - I have just spent 6 months as a trainee in a UK law firm doing nothing but setting up hedge funds, which doesn't make me the last word on the subject by any means but I do know what I am talking about. The freedom from regulation is how they are able to adopt the strategies that allow them to hedge in the first place, in contrast to retail funds, which do not have that freedom. I am very happy to change the emphasis of the introduction to give hedge fund investment strategies more prominence, but the way that hedge funds are structured is fundamental to everything that they do.

As I said above when I proposed the change in this discussion page before implementing it, my comments are based on my UK experience, so if hedge funds are directly regulated and directly taxed in other jurisdictions then please say so and we can find wording that encompasses the full range of hedge funds.

The revert to references to accredited investors etc is a) country-specific and b) technical wording that would not be understood by a layman, so is a retrograde step - we should be trying to get rid of that kind of material from the introduction. It should definitely be covered in the regulatory section, but not in the introduction.

Secrecy - it wasn't so much a question of "ignoring" that point as simply not stating it, but I'm happy for that point to go in.

Finally, I don't agree that all hedge funds are "absolute return" any more, but I think you clearly subscribe to the narrower and more literal definition rather than the common usage of the term - I tend to follow the latter, just because that is what everyone I know in hedge funds does. The disparity is one that should be noted in the text, but words like "overused" and "inappopriately" are your POV, and shouldn't be there.

I'll wait for your reply before we start changing things. Art Markham 19:10, 5 November 2007 (UTC)

See latest edits and citation. --71.42.142.238 17:54, 13 November 2007 (UTC)

I agree that the former wording was somewhat POV in that indicated that avoiding regulation was the intent of creating the fund. That is not necessarily the case. However have removed "absolute return" as that is not part of the generally accepted definition. See, e.g., http://www.sec.gov/answers/hedge.htm --Samiharris 13:59, 15 November 2007 (UTC)

24.28.6.209, I don't think all the changes you made are really neccessary. "structured to avoid direct regulation and taxation" doesn't strike me as at all contentious -- any HF lawyer or any HF manager I know would agree -- so I think it should be there. I also don't like defining HFs in terms of "absolute return", which is a much younger term and is also ill-defined.

Good point on secrecy though, I think people often assume HF secrecy is suspicious when most of it just arises from the (enforced) lack of a sales operation.

Perhaps it would make discussion more convenient if you set up a user name? -- Servalo (talk) 17:50, 16 November 2007 (UTC)

Comparing the two versions, in the main I tend to prefer Art's. How do the rest of you see it? I'll leave it a few days and then have a go at producing something that sits in between the two. -- Servalo (talk) 18:09, 16 November 2007 (UTC)

It would probably be worth noting as well that hedge fund managers are compensated as a function of the fund's return. In other words, they are given an incentive to see the fund/members make money. This is a unique identifier of what we have come to call a "hedge fund" these days.

In point of fact: In the U.S., it is in fact illegal for a stock broker, for example, to be given any incentive compensation as a function of the total return on his clients' assets. It'd likely also be good to point out as to 'why' this is the case (answer: that's how the major stock brokerage houses want it to stay, as it helps to ensure that top-performing brokers can't run away with 'their' clients).

I agree with Samiharris that it is POV to assert that the intention for creating a hedge fund is to avoid regulation. That's a secondary, peripheral thing...not the driving force with regard to intention. Moreover, given the U.S. stock broker example above, regulation itself ought to be questioned, as it clearly isn't always designed to look out for the common man's best interests. IMHO, grownups ought to be allowed to invest wherever they damn well please; the idea that the government is "here to help" just doesn't always hold water. ---- 71.42.142.238 (talk) 20:44, 16 November 2007 (UTC)

Proposed section on selecting hedge fund managers

Hi guys, I’m new at this so I can use some help. I think this article needs a section on evaluating hedge funds managers. It has a section on performance, but that’s only a small part of the issues. I think these issues belong here, but I could see why someone would want to put them in another article like the one on fund of funds. If anyone has any concerns about such an issue, please let me know. In editing this article, which I have been doing slowly, as time permits, I have been trying to make it less a PR piece for the hedge fund industry and more realistic. Again, I would appreciate all the help I can get.JustAnInvestor 16:44, 30 November 2007 (UTC)By the way, I used to be ThatOldOldInvestor, but I decided I didn't like the name.JustAnInvestor 16:46, 30 November 2007 (UTC)

If it's a well sourced summary of generally accepted practices it might be appropriate. But it seems like it's sailing very close to being a "how-to" guide for people selecting a hedge fund, and that's not really the purpose of Wikipedia. I applaud the desire to make the article balanced - perhaps you could double check it for overly complimentary language and unsourced assertions? Or provide a counter balancing, sourced, point of view to sourced assertions that have significant, respected detractors (see our neutral point of view policy for more on how to handle multiple view points)? Also, welcome to Wikipedia! Glad you hit the edit button and jumped on in. It's good to have you here. -- SiobhanHansa 19:09, 30 November 2007 (UTC)

I agree. The idea is worth thinking about, but I am skeptical.--Samiharris 19:45, 1 December 2007 (UTC)

Thanks to you both. This is exactly the kind of help I was looking for. I will be reviewing the article with your thoughts in mind over the next few weeks.

Concerning evaluating hedge fund managers, I understand your concerns and I will think about the issues you raise before I start editing. The problem as I see it naïve investors see a fund make a lot of money and then jump on it without understanding what they are buying. There are issues here that investors should know about. I only partially understand the not how-to issue. It is hard to say something about this subject that isn’t how-to or couldn’t be turned into how-to. This is worse than it sounds, by the way. I do NOT want to give readers the impression that reading a few sentences in this article will make them rich.

This brings me to the subject of fees. A few days ago I added or thought I added a few lines to the section on fees. But they are gone and I don’t know why. In those lines I was trying to do point out the limits of the following paragraph on fees. If someone removed my words on fees I need to know why so I don’t make the same mistake when I write about evaluating hedge fund managers. Again, my thanks to you both.JustAnInvestor 20:14, 1 December 2007 (UTC)

You're very welcome. By all means take a crack at a "selection" subsection. But remember that it has to be consistent with Wiki style, in that it has to be sourced and neutral. On the fee thing that was removed, I believe it was a disclaimer of the kind that is not consistent with Wiki style, which is encyclopedic. Usually "how to" and sections talking to the reader are not utilized. --Samiharris 20:26, 1 December 2007 (UTC)

Hi Guys, I made some major additions/changes to the performance measurement section. The theam of all of the changes is simple: choosing hedge fund managers on the basis of their rates or returns is dangerious, because the numbers may not be stable. My plan is to evaluate some further issues--if you guys aprove. I intend to talk about the things an investor should consider other than returns. I was also going to talk about the issues that underly returns. Has the data been audited, for example. Does all the make sense to you?

On a slightly different topic. Someone is asking for citations for some of my notes on the origin of the term hedge. I said that under some circumstances it is possible to trade without risk and someone asked for a citation. But I give an example in my next sentance. Same someone asks for a citation for the example. I can dig a citation out of an introductory finanace text, I guess. Would that be enough? I look forward to your feedback.JustAnInvestor (talk) 02:43, 18 December 2007 (UTC)

I realize you're trying your best with this. The problem is that both the text you wrote and the text you are replacing is not "encyclopedic" and reads like a personal essay. Additionally, the section totally lacks sourcing and smacks of original research. This is a problem with the entire "controversies" section, not just yours, and I have so tagged. --Samiharris (talk) 15:45, 18 December 2007 (UTC)

Sorry for the hemming and hawing, but on second thought I just reverted the old version. The problem is that the new one was essentially original research and just not appropriate for the encyclopedia.--Samiharris (talk) 16:02, 18 December 2007 (UTC)

Methods vs. returns

Resolved

I removed a sentence that appeared to be a nonsequitur, as it referred to disclosure of methods of investing in the context of disclosure of returns. One can disclose returns without disclosing methods. If the sentence is to be retained, I believe it requires a citation as I know of no basis for connecting the two. Perhaps I am missing something. Discuss?--Samiharris 15:47, 4 December 2007 (UTC)

You removed "Moreover, the divulging of a hedge fund's methods for achieving its high returns could unreasonably compromise their business interests." with an edit summary of "this sentence doesn't follow. disclosure of returns would not disclose methodoloy"

Essentially, the sentance says that saying how they earned their returns could hurt their business.

All fund managers make their livings by investing money for other investors. Those investors are paying the manager for two things: the convenience of having someone else make descisions and to earn better returns than the investor could by themselves. An historical example: With the growth of index funds in the 1980s and 1990s, stocks added to indexes started to pop in price on the day they were added (those removed fell) as index funds adjusted their holdings to match the index. Fairly early on, some investors started buying the stocks being added (and/or shorting those being dropped) between the announcement of the change and the effective date of the change. This method is now so well known that it is worthless: any price change in a stock from an index's composition change takes place as soon as the announcement is made (or before, based on speculation). While this little "trick" was pretty obvious, others are more subtle. Secret methods often become worthless once they are widely known.

Additionally, why pay a fund manager to earn better returns once you know how to do it yourself?

Yeah, it does need a cite though.

Mdbrownmsw 16:19, 4 December 2007 (UTC)

I think I understand your point. My feeling is that the language needs to be clarified, as it reads now as if disclosure of returns is equivalent to disclosing methods. But they are two separate issues as you know.--Samiharris 16:29, 4 December 2007 (UTC)

Ah, I get it now. Is this clearer? - Mdbrownmsw 16:41, 4 December 2007 (UTC)

Yes I think that makes it clearer. Thanks.--Samiharris 17:01, 4 December 2007 (UTC)

Global maacro

Is it me, or does the brief definition of global macro - "seeking related assets that have deviated from some anticipated relationship" - actually describe arbitrage? I'm fairly it's wrong, but someone please agree with me before I go changing it in error... Art Markham (talk) 19:13, 24 February 2008 (UTC)
Albert: I have improved all the strategies including the Macro, the above Macro definition was wrong. --avandalen 18:40, 11 March 2008 (UTC)

Regulation

I think this is currently perhaps the weakest section of the page. It has a US section that is very comprehensive and perhaps too long. You could write a book on the subject, I know, but maybe it could have its own page with a summary of the main issues for the layman here? I don't really want to touch it because I am sure there is someone more familiar with the issues than me. There is also a reference to comparison to private equity, which I don't think is a regulatory issue other than the last sentence. I also think that most hedge funds, regardless of the regime that they operate under, tend to have the same approach to regulation. I am going to write a paragraph for the top of the section saying basically that (i) investment regulations designed for retail funds in most major financial centres are too restrictive for most hedge funds to operate within, (ii) hedge funds are set up in order to avoid those regulations, and (iii) that has certain consequences for hedge funds (e.g. fewer than 100 investors or whatever). All thoughts appreciated. Art Markham (talk) 19:13, 24 February 2008 (UTC)

Strategy classification improved

I have worked on the strategy classification. The strategy classification is very important to understand hedge funds and to work with them but it is was far from complete. Therefore I have extended the number of strategies. Unfortunately different names are commonly used for the same hedge fund strategies and it is very important to know about these different names. For instance CTA is also known as managed futures. When different names exist, these are put between brackets. It was a challenge to describe the strategies with a short and sweet one line strategy description that focus to the real essence of the strategy. Some new strategies comes from the new HFRI indices classifications

The strategy classification has become a separate chapter and the old chapter is renamed to characteristics

These things are changed:
The long / short equity strategy is a strategy and fall into the directional group.
Risk arbitrage is the same as merger arbitrage.
Derivative arbitrage is a style not commonly used in the hedge fund industry and therefore left out.
Some strategy descriptions could be improved.

Here we use a classification based on the investment style what is common.
Macro is treated as a separate style which is common.

Please do not hesitate to react when there is a problem with the new classification.--avandalen 20:54, 4 March 2008 (UTC)http://en.wikipedia.org/wiki/User:Avandalen

People editing this page who have ABSOLUTELY no idea what a hedge fund is.

These guys are ruining the entry. I liked all the links at the bottom, and I imagine many people who came to Wikipedia to find out more about hedge funds did too. Why remove them, and reduce the usefulness of the page? Amyjbensted (talk) 12:28, 12 March 2008 (UTC)AJB

I think you may be under the misapprehension that Wikipedia is a place for people to publish what they know about a subject. As an encyclopedia we're not a primary publisher of information - we summarize information that has already been published. So if an assertion is to stay it needs good, previously published sources.

verifiability not truth is the standard for inclusion (though this shouldn't be taken to mean we want to keep information that is not correct just because someone has published it mistakenly in the past). We want to represent the significant opinions of experts in the field, all of which ought to be possible to source appropriately, without tipping over into fringe opinions or original research.

As to the listings, Wikipedia is not a directory. External links should provide further encyclopedic information about the subject, not simply link to organizations that engage in the practice. Dmoz would be a better place to build a directory (a link to which might be considered appropriate). -- SiobhanHansa 13:34, 12 March 2008 (UTC)

I think you are misunderstanding my point entirely - links and information have been taken out which are from published sources, information providers and journals - not links to hedge fund firms which should not be included. Wikipedia should be a source of knowledge (like a good encyclopedia), and I all statements should be backed up with evidence (in this case links to reports etc.). The editing of this page has reduced the hedge fund article to a bunch of unfounded statements, which is making the entire entry garbled and untrustworthy.217.36.46.224 (talk) 10:53, 13 March 2008 (UTC)

Sorry, I thought you were referring to some recent edits I saw in the history. Could you provide diffs to the stuff that was removed so we can see what specifically you think should be restored? (If the diffs are too difficult a mention of a date the content was in the article and some more specific indication of what the content was might help me find it). Thanks. -- SiobhanHansa 13:29, 13 March 2008 (UTC)

Management fees

We currently have this sentence: "Management fees are usually calculated annually and paid monthly." What does this mean? That the fee is paid in instalments? Or that a "2% per annum" fee is in fact a 2/12% per month fee? Art Markham (talk) 13:02, 18 May 2008 (UTC)

Probably we should just drop the sentence because it is confusing and technically wrong (because fees are usually calculated based on the assets under management in each month/quarter, not at year end). FWIW I think both of your interpretations are true, isn't it the same to be paid 2% in 12 monthly instalments or to be paid (2/12)% each month? If someone leaves the hedgefund after 6 months they will have paid 1% on their average investment under either interpretation...? Servalo (talk) 14:11, 9 July 2008 (UTC)

Mathematically I think they will be slightly different - if NAV is rising throughout the year (let's be optimistic) then 1/12th of 2% of the NAV in Jan, plus 1/12th of 2% in Feb etc etc will be less than 2% of the NAV at the end of December. Additionally, as the fees are deducted from the NAV I think calculating monthly will also trim back later fees slightly.

I think you are right that they are actually calculated monthly/quarterly though, even though they are generally publicised as annual. Art Markham (talk) 11:00, 19 July 2008 (UTC)

"Notable hedge fund management companies"

I think we need to keep a lid on the list of notable hedge fund management companies, as we now have 16, and it will keep creeping up as more are added over time. I think the idea of this section, if it has an idea, is to give readers a flavour of managers that have been newsworthy or extremely successful, or to illustrate a general spectrum of managers. I propose that we limit it to 10, and that we try to get agreement on the list here rather than deleting and reinserting on the main page.

Currently we have the following, and I have added my thoughts about them, and whether I think they should make the cut:

• Amaranth Advisors - Famous collapse - YES
• Bridgewater Associates - $45bn in hedge funds, so big. YES
• Centaurus Energy - only $3bn in assets, but has brushed the news via Amaranth. NO
• Citadel Investment Group - $18bn, apparently very high trading volumes (3% of trading in NY, London, Tokyo, apparently). YES
• D. E. Shaw & Co. - $35bn, quant fund, not much else. NO
• Fortress Investment Group - public company, so been in news and interesting - YES
• Goldman Sachs Asset Management - $30+bn, big bank-owned fund, though JP Morgan's is bigger. YES, or replace with JPM.
• Harbert Management Corporation - $23bn, nothing else notable - NO
• Long Term Capital Management - most famous HF collapse so far - obviously YES
• Man Group - 200 yrs old, public company, $72bn (not just hedge funds) - YES
• Marshall Wace - $15bn, fairly well-known in London - NO
• Pirate Capital LLC - who? NO
• Renaissance Technologies - Well known, been very successful for a long time - YES
• SAC Capital Advisors - $15bn, not much in the news - NO
• Soros Fund Management - George Soros, shorting the pound etc - YES
• The Children's Investment Fund - Biggish, often in the news for shareholder activism, reserves huge amounts for charities - YES

Thoughts? Art Markham (talk) 18:39, 25 May 2008 (UTC)

If we need this section I agree your 10 are the best ones. However this kind of list is always going to be contentious so perhaps we should go further; IMO the only names that really help the reader understand the industry are LTCM and Amaranth, the others are just big examples and there is no particular reason to favour their marketing efforts over anyone else's. Servalo (talk) 14:29, 9 July 2008 (UTC)

The 16 has grown to 19 in the last 2 months, if we keep this list it will need a lot of pruning... Servalo (talk) 14:41, 9 July 2008 (UTC)

I like the way the list has shrunk. It was MUCH to big and confusing to readers. However, I think SAC should put on the list again. It does have $28b in assets which makes it a very large fund. Let me know what you think. JakeH07 (talk) 03:43, 22 July 2008 (UTC)JakeH07JakeH07 (talk) 03:43, 22 July 2008 (UTC)

Intro too long?

I appreciate this is a complex topic but the intro should give a (briefer) summary of what these things are for a wide audience. --Vince (talk) 09:03, 18 September 2008 (UTC)

I totally agree - it's now about twice as long as it should be. I'm going to wield the axe... Art Markham (talk) 14:38, 24 September 2008 (UTC)

OK, I have cut it back quite severely (from 520 words inc. footnotes to just over 300). I have taken out any US-specific elements, which don't belong in the intro, and generalised the explanations. I have tried to keep as much of the information as possible, often in a different form or place, but obviously that isn't possible for everything - an intro will never give all the detail. Art Markham (talk) 16:27, 24 September 2008 (UTC)

"Mutual funds are regulated by the SEC, while hedge funds are not"/regulation in general

This is simply wrong. Investment Advisers (the managers of hedge funds) in the US are governed by the Investment Advisers Act of 1940. There are many aspects of the Act that apply both to registered and unregistered advisers. The most important of these provisions are anti-fraud measures. The SEC enforces the Act.

Registered IAs can count on a visit from the SEC on a schedule determined by the adviser/fund's perceived riskiness. To try and draw some kind of distinction between an adviser being regulated and a fund being regulated is pointless: when the SEC visits, they are empowered to review all aspects of an adviser's funds.

The SEC can use Rule 206(4)-8 under the Act to come in and look at an unregistered adviser's funds, as well.

More, it is ludicrous to state that hedge funds are "largely unregulated," although this phrase is repeated in the popular press frequently. In the US, hedge funds may be regulated by the SEC, CFTC, FINRA, various SROs and exchanges, state securities regulators, the Department of Labor and maybe others. In addition to the Act, hedge funds are regulated under the Investment Company Act (for exclusion from the definition of an Investment Company) and the Securities Act of 1933 (Regulation D -- concerning sales of private securities). Any trading by direct investment hedge funds is subject to all the rules of FINRA and the exchanges.

If anything, regulation in the UK is even stricter. Solid regimes exist in other jurisdictions, including Cayman and Bermuda.

In short, it is the case in the US and the UK, among other major venues, that hedge funds are (highly) regulated pools of capital.

I will propose changes to the article as time permits. 69.86.113.25 (talk) 14:43, 18 September 2008 (UTC)

I agree that it is wrong to say that hedge funds are not regulated, and unhelpful in a general encyclopaedia to rely on the distinction between the fund and the manager to say so. We should change what you have quoted. Generally though, hedge funds have far fewer restrictions on their activities than ordinary funds, and so you cannot say that they are "highly regulated". It is obviously a comparative statement, and the comparison should be against other types of fund, or financial institution generally, when deciding how regulated they are. Compared to them, they are lightly regulated.

Your mention of the Investment Company Act exemption is interesting - I would say that where a fund structures itself to obtain and exclusion, that is not considered to be a form of regulation. You can think of it as such, but it is generally thought of as a way of separating which funds are regulated in certain important ways, and which are not. Hedge funds are not regulated in such ways. Art Markham (talk) 00:09, 2 October 2008 (UTC)

Largest Hedge Funds by Assets Under Management

putting together this list. why is citadel not in the ref? —Preceding unsigned comment added by Vvarkey (talk • contribs) 23:23, 29 September 2008 (UTC)

The list has a source ref, so presumably the source simply did not mention Citadel. If we have a better list we could consider changing it providing we can source it, but probably we should only do this if the current one is demonstrably wrong or out of date. Sizes of funds vary over time, and are not always possible to know for certain in any case. Art Markham (talk) 00:00, 2 October 2008 (UTC)

Essays added to the article

Two sections have been added which read more like essays/articles than encyclopaedic entries. I am referring to "The Hedge Fund Paradigm Extends to Other Sections of the Industry" and "What Role Can Hedge Funds Play in a Mean/Variance Efficient Portfolio?". There are some interesting points raised, but I think much is NPOV and parts appear to be original research. I would say that they need to be broken up (removing the NPOV material and original research) with the useful bits distributed to the relevant portions of the article (e.g. the fees section), but what does anyone else think? I don't want to delete things in haste... Art Markham (talk) 15:07, 11 November 2008 (UTC)

I've deleted parts in haste. Servalo (talk) 20:39, 24 November 2008 (UTC)

Influence on 2008 financial crisis/meltdown?

I think it might be helpful to understand which influence the Hedge Funds had, to what extent, and in which segments of the finance industry. Naked short selling will be outlawed in Australia soon, and understanding the detrimental or beneficial influences of short selling, naked short selling and Hedge Funds in general in this crisis situation would be good because - so I hope - mechanisms must be developped to prevent such avalanches in the future. We all heard of the fraudulent loans in the housing market and bogus credit ratings for investments - but how exactly did this affect Hedge Funds and then cause a worldwide financial meltdown? 121.209.49.113 (talk) 01:09, 17 November 2008 (UTC)

I don't think it is entirely certain yet. Hedge funds are currently (i) seeing high levels of redemptions, as investors suffer losses in other areas, seek less risky investments and so on, and (ii) deleveraging, as the cost of leverage rises. Both mean that hedge funds are selling off a lot of assets, which has contributed to falls in the stock markets. But in terms of the original cause of the problems, I don't see how hedge funds had anything to do with, and I don't believe for a minute that short selling per se was the cause of any "unfair" falls in stock prices. Rumour spreading (by short sellers) might have caused it in some cases, but no one has any evidence for it so far as I can tell. But in terms of adding any of this to the article, it would all be "original research" and hence verboten. Art Markham (talk) 21:46, 22 November 2008 (UTC)

Agreed, though some mention of the impact of the crisis on HFs may be appropriate Servalo (talk) 20:42, 24 November 2008 (UTC)

Who wants to keep the lists of HFs?

I deleted all but the list of largest HFs for various reasons (eg being a directory, subjective, outdated, irrelevant, advertising). It has been reverted, could I ask who wants to keep it and why? Servalo (talk) 20:49, 24 November 2008 (UTC)

Lobeta, who reverted them, commented that the lists of HFs were informative. I guess there is a judgement call to make between their usefulness and my various dislikes. What do you think? Servalo (talk) 21:08, 26 November 2008 (UTC)

I would like to see the "notable firms" list go. We have too many lists, and this is the most subjective. If a firm isn't elsewhere in the article, it arguably isn't that notable anyway. I'm not very excited by top earning managers either (and it also sprawls somewhat) - though noting somewhere in the article what top-earners make would be interesting. Largest funds and best-performing funds seem quite useful - though anyone following RAB Special Situations in the press might think the list a little out of date. Art Markham (talk) 17:48, 13 December 2008 (UTC)

Hmmm. No votes in favour in 2 months, I'll try taking it out again... 194.154.183.27 (talk) 17:03, 27 January 2009 (UTC)

there is no reliable source for 'best performing funds' only best performing funds that report to a publication like HFM or have a bloomberg or similar code. I think notable firms or notable makes sense for example, Paulson Credit Opps that shorted the mortgage market and netted the company 5billion in fees (or whatever it was), or Amaranth's crash and the impact on fund of funds, etc. Schnerg (talk) 19:11, 2 October 2009 (UTC)

AIMA roadmap to HFs

The roadmap is scholarly, well written, reasonably balanced and freely available. I think it is easily the best general source on the subject and over time I intend to replace some of the references currently take from commercial sites with references to it.

http://www.aima.org/en/knowledge_centre/education/aimas-roadmap-to-hedge-funds.cfm

Another informative source is

http://www.ustreas.gov/press/releases/reports/investors'committeereportapril152008.pdf

which poses lots of worthy questions to any reader who can remain awake. Servalo (talk) 10:44, 20 December 2008 (UTC)

A small point on prime brokers

I have changed "Prime brokers are now typically parts of large commercial banks" to "Prime brokers are typically parts of large investment banks", and as this in a small way reverted the previous edit (which substituted "investment" for "commercial"), I thought I should mention why. While not all banks that provide prime brokerage services are pure investment banks, all of them undertake investment banking activity and, more importantly, are prime brokers only because of their investment banking activity. A purely commercial bank - which I take to mean a high street bank - would not involve itself in prime brokerage. I therefore think that "investment bank" is better. "Commercial bank" would not include Goldman Sachs or Morgan Stanley, for example, two major prime brokers which are purely investment banks. Art Markham (talk) 19:57, 9 April 2009 (UTC)

A year ago I'd have agreed, now I'm not sure. GS and MS are investment banks and thats why they built the PB businesses, but both now have commercial bank licenses. Are there still any independent IB PBs? Still, on reflection your version is probably better. Servalo (talk) 09:30, 11 April 2009 (UTC)

Economics and business headers

I've put in ratings of B Mid and B High respectively as these seem to me the best match to some samples from the project pages. I do not claim any expertise in page assessment. Servalo (talk) 09:59, 11 April 2009 (UTC)

I'm slightly concerned that the business template now directs to a separate discussion page. Servalo (talk) 11:00, 11 April 2009 (UTC)

Explanation of reversions

Just to explain my reversion of three edits, as I think they were made with good intentions: 1. The "limited range of investors" in the intro should not mention 100 investors, as that is a specifically US concept. 2. The Management Fee edits were original research and/or not NPOV. 3. The edit regarding trimming fund sizes to increase returns does apply for some funds, but it is not universally true, is not easy to verify and was in an inappropriate place (under Domicile). Westmorlandia (talk) 12:47, 6 May 2009 (UTC)

Alternative Investment Fund

there should either be a redirect from "alternative investment fund" to this page or that name should be mentioned somewhere. As the article says hedging isn't necessarily a strategy of every hedge fund; the industry is moving towards "AIF" and since most written material on the subject is in trade publications it might be worth a mention. Schnerg (talk) 18:56, 2 October 2009 (UTC)

"Hedge fund" is not synonymous with "alternative investment fund". Alternative investment funds include private equity funds, among others. That said, a hedge fund is a type of AIF, so it might be worth a mention.

I also query the proposition that "the industry" is moving towards using "AIF" - I work in the industry in London, and I never hear the term AIF used except in the concept of the European AIFM Directive (which won't make the terms any more popular!). I'm not saying my experience is conclusive, of course. Westmorlandia (talk) 15:29, 9 October 2009 (UTC)

Sidepockets?

sidepockets and SPVs are a lot more common now after the mortgate dive. is this worth a mention and if so in what section? Schnerg (talk) 19:00, 2 October 2009 (UTC)

Good point. As it's Friday afternoon, I will add something. Westmorlandia (talk) 15:29, 9 October 2009 (UTC)

I wrote it, but then the Wiki servers told me they had an error, and it was lost. Ah well... —Preceding unsigned comment added by Westmorlandia (talk • contribs) 16:07, 9 October 2009 (UTC)

HEDGE FUNDS —Preceding unsigned comment added by 121.245.184.131 (talk) 07:20, 28 October 2009 (UTC)

High Water Mark

I have reverted an edit in the "High water mark section", which had been amended to say that the high water mark is the NAV after deduction of performance fees ($116 in the example). I reverted it because I have only seen fees worked this way once (and it caused raised eyebrows on that occasion. In every other fund I have looked at, fees are payable only for gains above gross NAV (i.e. before deduction of performance fee - which, in the example, means from $120 upwards, not $116), so I am pretty sure calculation by gross NAV is market standard. Happy to be told otherwise if the weight of opinion is against me.

As a general point, I don't think investors would be too keen on paying fees on the gain which recovers the ground lost by fees paid previously... Westmorlandia (talk) 13:44, 11 December 2009 (UTC)

Couple of thoughts

Now we have seen a real, live financial crisis, does the systemic risk section still really make sense? While it discusses real historic fears they have now been proved wrong, and LTCM looks small!

I see the notable hedgefunds section is still attracting vanity links. I would prefer to have a section "Notable hedge fund disasters", which would keep Amaranth and LTCM but not promotional stuff. Anyone object? Servalo (talk) 12:48, 24 February 2010 (UTC)

I think the systemic risk section ought, in fairness, to remain. It could do with a redraft, but I'm not sure that we can say that those historical fears have been "proved wrong" - LTCM still happened. And while LTCM may look small compared to Lehman Brothers, it was significant then and would be significant if it happened again (and with the banks fewer and probably weaker, the results if it happened again now might be different).

I do agree about the "Notable hedge funds" section - it is a fairly useless section if it just lists large hedge funds. It would be good to find a way of keeping e.g. TCI there, which is notable for giving large chunks of its profits to charity and for being in the news through its shareholder activism (i.e. it is genuinely notable), but unless we change the heading we will keep getting vanity links. Otherwise, we can report the vanity links to the SEC,, for promoting their funds to the public via Wikipedia. :) Westmorlandia (talk) 15:47, 2 March 2010 (UTC)

Seward & Kissel

The mention of Seward & Kissell in the intro looks like a vanity edit. Anyone else have any views on this. As I explained when I removed it originally (it has been reinserted), I think the innovation was the investment strategy, and the law firm wasn't particularly important. (I say this as a lawyer.) Anyone have a different view? Westmorlandia (talk) 12:58, 17 March 2010 (UTC)

I was just thinking how odd it looks, too. Certainly it doesn't belong in the first para. But it's not correct, I don't think, to say the innovation would only have been in the investment strategy. Structuring new products can also be in the domain of smart lawyers. For instance, the creation of "registered hedge funds" that are registered under the 40 Act and the 33 Act (thus tremendously opening up distribution) was a lawyer-driven innovation.

If the claim is true (and that's the first I've heard about it), then it might belong in the article on SewKis: it is not important enough to be among the first things one reads about hedge funds. HedgeFundBob (talk) 01:07, 11 April 2010 (UTC)

It would not be entirely surprising if "Stnadel", who added the Seward & Kissel references, was Steve Nadel, partner in the Investment Management group at Seward & Kissel. If so, he's busted and should stop using this page to advertise his firm. ;-)

Seriously, I'll probably just report the spam next time, as I'm getting bored of deleting it. Westmorlandia (talk) 20:06, 3 May 2010 (UTC)

How odd. Everyone in the business knows Steve Nadel...would have thought he had other things to do. HedgeFundBob (talk) 01:02, 28 June 2010 (UTC)

Is citation on Winslow Jones still needed?

In the first paragraph it is said that:

Some people consider the fund created in 1949 by Alfred Winslow Jones to be the first hedge fund.^{[citation needed]}

But in History section it is said

Sociologist, author, and financial journalist Alfred W. Jones is credited with the creation of the first hedge fund in 1949.

Here the footnote AIMA Roadmap to Hedge Funds is supplied already.

Another source for the same claim:

Since the term was first used, in 1966, to describe the long-short fund set up by Alfred Winslow Jones in 1949 (which took both long and short positions on the US stock market), most hedge funds have been limited liability partnerships.

(Citation from Niall Ferguson, The Ascent of Money (Penguin Press, NY, 2008), page 314, first sentence from a footnote.)193.219.130.209 (talk) 12:47, 15 June 2010 (UTC)

Useful. Though the Niall Ferguson citation doesn't exactly affirm its credibility by stating that most hedge funds have been "limited liability partnerships" - they have been limited partnerships, which are very different beasts. 57.66.103.6 (talk) 16:15, 22 September 2010 (UTC)

Found citation for US Regulation section

I am researching hedge funds and came across a reference that is needed here.

In the US Regulation section, the page states that non-accredited investors can participate in hedge funds, but a citation is needed.

I found this...does it work? http://www.hedgefundlawblog.com/non-accredited-investors-in-hedge-funds.html --98.108.136.252 (talk) 06:33, 18 July 2010 (UTC)