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The Hurdle Rates Debate In The Hedge Fund Industry
Hurdle rates are the lowest rates that an investor or a fund manager deem acceptable. Part of the hurdle rates debate stems from the fact that the fund managers make their money through performance fees when the investments do well, but they don’t pay a penalty when the investments do poorly. Meanwhile, the investors do make money when the investments do well, but they also lose their proverbial shirts when they do poorly. A further problem is that both the Investment Advisers Act of 1940 and the Employee Retirement Income Security Act, though tools of overseers of registered investment advisers, do not have jurisdiction over hedge funds, leaving the fund managers free to set hurdle rates as they deem appropriate.
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Is an Inverted Yield Curve a Reliable Indicator for Hedge Funds?
When equity markets are behaving normally, bond yields correlate with their maturity dates. In other words, a bond that matures in a decade will have a higher yield than one that matures in three months. However, in some cases, you’ll see an inverted yield curve in which shorter-term debts have a higher rate of return than longer-term debts. Let’s take a look at why that happens, what it supposedly means for the economy and why such an inversion may not be much of a signal for investors.
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Alternative Investment Trends that Hedge Funds Need to Know
Information gathered from investors between 2022 and 2024 sheds light on the sorts of investment strategies fund managers are favoring. This gives us a bird’s-eye view of the demand for each technique and how investors’ preferences change over time. More importantly, it gives us a clear picture of alternative investment trends that hedge fund managers need to know about. Below is a summary of how industry professionals are currently thinking about different alternative investment assets.
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Are Covered Call Strategies a Good Call?
In recent years, investors have shown more interest in calls as one of many options-style trading strategies available to produce income. Investors like the idea of a limited short-term risk for a limited return while waiting for market changes to provide them with better opportunities. The popularity of covered calls as a long-term, low-risk strategy has fueled online searches using the phrase “Are covered call strategies a good call?” to such a high degree that we believe it’s critical to break down the pros and cons of this investment tool to help uninitiated investors to understand the actual risks.
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Hedge Fund Industry Trends to Watch Out For Throughout 2024
The hedge fund industry constantly evolves, and its dynamic nature allows those who adapt and embrace change to thrive. At the same time, though, those who do not adjust to the transformative nature of the industry are likely to suffer. Staying on top of the latest industry trends is crucial, and it is also helpful to pay attention to industry predictions. Doing so enables you to adjust thoughtfully and quickly. What are the hedge fund industry trends to anticipate for 2024?
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Are Liquid Alts Fees Too High?
One of the hottest investment trends of the past few years has been liquid alternative exchange-traded funds, also known as liquid alts or liquid alt ETFs. Investment strategies involving these specialized funds have enjoyed significant growth in popularity, although some argue that the prices charged by money managers are too high..
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What Kind of Impact Could Artificial Intelligence (AI) Have On Markets?
For those who might have missed it, artificial intelligence (AI) is taking the U.S., and arguably the world, by storm. To appreciate why this is happening, we should probably take a moment to familiarize ourselves with AI is and its ever-growing role in our day-to-day lives. In short, AI is an umbrella term for numerous technologies, such as machine learning, deep learning, and natural language processing (NLP), used to perform tasks that typically require human intelligence. Examples of such technologies include chatbots, facial recognition, digital assistants, and smart home devices. ChatGPT, Microsoft Copilot, and Google’s Bard also fit under that umbrella.
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Have Hedge Funds Successfully Mitigated Downside Risk Over The Past 20 Years?
In a modern world characterized by uncertainty and risk, a growing number of investors are looking to hedge funds as a means to shield their assets against volatility, produce more predictable returns, and secure their financial future. But as with any other investment vehicle, knowing whether hedge funds have historically mitigated downside risk and acted as the shield they’re reported to be is crucial to investing with confidence. Let’s take a closer look at whether hedge funds successfully mitigated downside risk over the past 20 years and what it means for the clients you manage.
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Hedge Fund Compliance 101
Compliance management is crucial for hedge funds, especially considering the strict regulatory requirements and addition of new rules that continually require industry professionals to pay close attention to their governance and compliance controls.
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Who Benefits from a Firm-Wide Investment Risk Assessment Solution?
To remain competitive, asset managers, hedge funds, private banks, wealth managers and family offices have been trying to modernize certain aspects of their investment operations. Although the industry gets more sophisticated by the day, there are remaining gaps and challenges in identifying the various investment risks which are often hidden from the untrained eye.
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How to Quantify the Risk Exposures and Concentration of Multi-Asset Portfolios?
The evaluation of a portfolio’s overall risk exposure to normal or Black Swan market conditions cannot be adequately described by a single risk statistic. Instead, it requires the deployment of a selection of risk metrics and calculation methodologies, to ensure that the risk that one assumes to produce a performance, complies with given investment policy criteria.
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The Importance of Having the Right Compliance Framework for Hedge Funds
Over the past decade, there has been a marked increase in the number of regulations and reporting requirements present in the financial sector. As a result, compliance is now one of the most important aspects of every hedge fund’s daily activities.
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The Importance of Operation Control in Hedge Funds
When discussing hedge funds, many people focus on investment strategies and potential profits. However, it is also very important to consider risk management. The right operational control allows hedge fund managers to safeguard the finances and satisfaction of their clients. Why is operation control so valuable for hedge fund management?