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Archive for the ‘Hedge Funds’ Category

Sally Dewar, Managing Director of the FSA’s Wholesale Markets Division, gave a speech on September 17th, 2009 outlining four key areas which need to be addressed in order to ensure effective fund regulation and the regulatory approach which ought to be adopted.

Speaking at the FSA’s Asset Management Sector conference, Dewar said that “most of us can see value to the European and global capital markets, and the wider economy, in sensible and proportionate harmonization of regulatory standards in the areas under discussion.”

The four areas Dewar highlighted are:

Correct identification of the weaknesses in the present regulatory arrangements and addressing them in a proportionate way

Do hedge funds make commercial mortgage loans? The answer is unequivocally yes. Hedge funds lend billions to commercial real estate property owners, investors and developers every year. In-fact, during this credit crisis, hedge funds filled an important role by funding deals the banks couldn’t. Many, many properties were saved from financial disaster last year because they secured funding from a hedge fund.

A hedge fund is an investment company set up and managed by Wall Street bankers and funded by wealthy individuals or other cash rich entities, such-as trusts, endowments and corporations small and large. Originally hedge funds were created to “hedge” risks associated with more traditional investing, but today hedge funds are a form or high return investing unto themselves.

Although many are registered with the SEC (Securities & Exchange Commission) they remain largely unregulated and are free to invest as they see fit. The bulk of hedge fund activity involves trading in the equity, debt and derivatives (options, futures, synthetic securities etc.) markets. However, a good number of hedge funds have a real estate component that seeks opportunity by investing in property. It is the funds that have an appetite for real estate that will consider lending against a quality building or a promising development.

Hedge funds are opportunistic, high return investors; borrowers should not expect low rates and great terms. Commercial mortgage loans, when offered, will be high interest, short term loans with significant points and fees attached. In some cases the hedge fund will provide all the funds necessary to close a deal but will insist on becoming an equity partner and will demand a percentage of any future profits.

The best way to approach a hedge fund is with a short, simple deal summary that highlights the strong points of the property or development. Don’t send a full business plan or loan package; hedge fund managers are traders at heart, they won’t take the time to read a large proposal unless they already have an interest in it. If they like your summary they will request more information.

Hedge funds make decisions quickly and don’t string people along. If they like a deal and can make good money on it they will fund it in a very fast and efficient manner. If they don’t like your deal they will let you know right away.

The world of Wall Street hedge funds is very private and very exclusive but once you’ve done a successful deal and made money for them, you will enjoy a reliable and dependable funding source.

Most investors know that hedge funds make commercial mortgage loans, but few know how to approach a fund or exactly how secure an approval.

A hedge fund is a professionally managed portfolio of investments that is typically open to a limited range of sophisticated or wealthy investors. As the name suggests, these funds hedge their risks by offsetting potential losses by hedging their investments using different approaches, the most popular one being short selling. Nowadays, the term hedge fund is applied to funds that do not actually ‘hedge’ their risks but rather increase it because they expect to generate a higher return.

Mutual funds invest in a certain sector (e.g. technology) or use a specific approach (e.g. small cap growth). To determine whether a mutual fund has been performing well, its returns are usually compared to a the market benchmarks e.g. Russell Financials 1000 index. On the other hand, hedge funds seek

If you’re wondering how to become a hedge funds trader because you want to get rich quick without a lot of work, you may be in for a surprise. While it’s true that hedge funds traders and managers have some of the highest earnings potentials, a great deal of work goes into this job, and you won’t necessarily make a six-figure salary. But if you have had success with your own investments and have been building credibility and experience in the financial world, this could be an ideal career for you.  

There are a couple ways you can go about breaking into this career. In either case, however, it is a good idea to get at least a bachelor’s degree in a subject such as business or economics. Even if you don’t necessarily need a degree, people will feel better about trusting their money to a college graduate, and you will be better prepared to keep up with educated people in conversations if you have a well-rounded academic background. After college, or even during, you can begin networking. If you know a lot of wealthy people who are willing to give you capital, you could start a hedge fund on your own, but more than likely you will begin working for a large company managing their hedge funds.

When you break into this career you will want to have a plan concerning your strategies for managing risks and a solid understanding of the latest reports concerning hedge funds successes and failures. Your plan should also include an estimate of how much capital you need, your goals and a marketing concept. At this point you can have a finance attorney write an offering circular listing what your strategies are, how you will implement them, what an investor needs to qualify, etc. Then find a prime brokerage firm and locate your seed money, which will probably be at least $50,000. You will also need to hire a compliance officer.

Hedge funds traders can earn anywhere from $60,000 as a beginner on a bad year to multi-million-dollar salaries as a seasoned professional on a good year. It won’t be easy, but if you’re good at what you do there’s plenty of potential. 

Good question. But to answer it properly it is first necessary to understand the difference between hedge funds (HF) and mutual funds (MF). But of these investment options have similarities in that they both pool the investor’s money across a wide selections of investment opportunities. Hedge funds however usually limit their investors to large institutional types or wealthy investors and they are much riskier and are not covered by the extensive regulation that inhibits other type of funds.

While both of these funds hold stocks, mutual funds stick to investing in publicly traded stocks, but in case of hedge they have no such limitations and can usually buy into any type of investment that the fund manager thinks will generate a payoff for the investors. Also, because hedge funds often invest in private corporations, financial details are not generally available to the general public.

Other similarities and differences include the following:

• Both funds usually invest in bonds at a certain level, since bonds are safer, even though they have a lower return. Like with stocks, MFs invest in only government bonds while in case of other they use private loans to private corporations to accumulate profits for its investors.

• While mutual funds gauge their performance according to one of the major stock indexes (Dow Jones, S&P 500 or NASDAQ), but in case of later they shoot for absolute growth targets without considering the markets.

• Both funds claim to lower risk by spreading out investments across a broad range of securities and investments, since hedge have no real regulation they are able to invest in very high risk, high return investments.

Because of the general freedom that a hedge manager has over the investments that he can make he is free to invest in MFs. Because MFs have a lower return rate however, and expectations of the investors in the HFs are much higher than them, so the fund managers will generally not invest in them. If a certain MF shows a high, steady return, however, some fund managers do sometime take the plunge, at least until the MF’s rise levels out, and will dump some money into the mutual fund to reap the profits.