By Lars Jaeger

The 1st useful and obtainable advisor to dealing with possibility whilst pursuing replacement funding ideas (AIS). offers broad references should you desire to discover person subject matters or AIS-related mathematical types in higher aspect.

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Extra resources for Managing Risk in Alternative Investment Strategies: Successful Investing in Hedge Funds and Managed Futures

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Event-Driven strategies fall in some medium range in terms of their directional market sensitivity. Most of the strategies in the array of Hedge fund styles emerged in the last 15 to 20 years. Relative Value strategies (Convertible Arbitrage, Fixed Income Arbitrage, Equity Market Neutral) seek out different specific risk premiums and arbitrage opportunities in equity and fixed income markets. Event-Driven strategies (Distressed Securities, Merger Arbitrage and Convertible Debenture Arbitrage) in contrast capitalize on the occurrence of special events that impact the value of certain securities.

Futures strategies and Equity Market Neutral each take about 5%, Convertible Arbitrage, Distressed Securities and Emerging Markets about 3% each. Convertible Arbitrage and Equity Market Neutral are Relative Value strategies, but they are counted separately here. Other strategies like Short Selling, Regulation D and Equity Market Timing fall below the 1% range. Note that these numbers depend on the classification scheme chosen (in this case by Hedge Fund Research). Understanding the sources of AIS returns It is widely understood among investment professionals that Hedge funds and Managed Futures generate investment returns that are significantly more attractive than average equity and bond investments measured on a risk-adjusted basis using commonly available quantitative risk assessment tools.

41 .... 8409 Chapter 3 p38-110 11/4/02 1:13 PM Page 42 MANAGING RISK IN ALTERNATIVE INVESTMENT STRATEGIES Fair value: Utilizing quantitative pricing models, the manager identifies mispriced securities. These ‘cheap’ positions are acquired and hedged. When ‘fair value’ is ultimately reached, these positions are sold and profits are realized. 2 illustrates the way in which Convertible Arbitrage returns are achieved. e. how much the option is in or out of the money. e. deeply out-of-the-money issues).

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