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Hedge Funds: A Presentation of The Basic Idea Behind The Worldwide Phenomenon

Hedge funds are specialized investment funds that employ a variety of strategies to generate returns, including leverage, short selling, and derivatives. They trace their origins to 1949 when Alfred Winslow Jones created one of the first hedge funds. Today there are over 10,000 hedge funds managing close to $3 trillion in assets. Hedge funds differ from mutual funds in their registration requirements, investor limits, flexibility of strategies, liquidity, and ability to invest both long and short. In India, hedge funds are regulated by SEBI and divided into three categories based on their investment strategies. Despite barriers like taxes, hedge funds offer benefits like minimum returns, capital protection, and wealth management. However, some hedge funds have also been involved in major

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Aishwarya Sekhar
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44 views9 pages

Hedge Funds: A Presentation of The Basic Idea Behind The Worldwide Phenomenon

Hedge funds are specialized investment funds that employ a variety of strategies to generate returns, including leverage, short selling, and derivatives. They trace their origins to 1949 when Alfred Winslow Jones created one of the first hedge funds. Today there are over 10,000 hedge funds managing close to $3 trillion in assets. Hedge funds differ from mutual funds in their registration requirements, investor limits, flexibility of strategies, liquidity, and ability to invest both long and short. In India, hedge funds are regulated by SEBI and divided into three categories based on their investment strategies. Despite barriers like taxes, hedge funds offer benefits like minimum returns, capital protection, and wealth management. However, some hedge funds have also been involved in major

Uploaded by

Aishwarya Sekhar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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HEDGE FUNDS

A presentation of the basic idea behind the worldwide phenomenon


THE CONCEPT OF HEDGE
FUNDS
• Hedge funds a specialised volatility open end investment company that uses
a variety of investment techniques.

• Hedge include a multitude of skill based investment strategies with a broad


range of risk and return objectives.

• Hedge funds are legally limited partnerships.

• They are unregistered investment companies.

• They have limited liquidity.


HISTORY OF HEDGE FUNDS
• Hedge funds were devised and implemented by Alfred Winslow Jones in the
year 1949. He is often referred to as “father of hedge fund industry”

• Jones had employed 2 strategies : Leverage and short sell. These strategies
are still employed by hedge fund managers across the world

• His strategy did not come into the mainstream till the late 60’s

• During the 1990s the hedge funds increased significantly with the 90s stock
market rise

• Today there are over 10,000 hedge funds in existence with close to $3 trillion
in Assets under management(AUM)
SCOPE OF HEDGE FUNDS
• Hedge funds got a relatively late start in India-2012.

• Hedge funds using strategies like leveraging ,long, short and derivatives to
generate high returns , India has opted for a tougher stance

• Even though hedge funding leads to more volume and thus liquidity in the
market,the high taxes are acting as the major barrier.

• Reasons for lesser investment:

1. The Indian market is not large enough

2. Financial and regulatory mechanism


DIFFERENCE BETWEEN
MUTUAL FUND AND HEDGE
FUND
Registration

Number of Investors
Flexibility

Paperwork

Liquidity

Absolute Vs Relative
Self-Investment
RULES AND REGULATIONS OF
HEDGE FUNDS
• SEBI is regulating the hedge funds. They are categorised in three,

• Category 1 : these funds receives incentives from the government, sebi are
other regulating agencies. These include social venture funds, infrastructure
funds, venture capital funds and SME funds.

• Category 2: these funds are allowed to invest anywhere in any combination,


cannot take debts, except for day to day operation purpose. These include
Private equity funds and Debt funds.

• Category 3: Funds that make short term investments and then sell like
hedge funds come under this.

• The minimum investment for one person is 1 Cr. Minimum corpus is 20 Cr.

• Initial contribution of the fund manager or promoter should be less than


2.5% of investment or 5 Cr whichever is less.
RETURN ON HEDGE FUNDS
 Minimum Return

 Safety And Assurance

 Certainty and Customisation

 Protection of Capital

 Wealth Management

 Generate Profit
HEDGE FUND FRAUDS
• BERNIE MADOFF INVESTMENT SCANDAL
• SAC CAPITAL FRAUD
• GALLEON GROUP
THANK YOU 

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