In the most basic hedging operation. After the fund manager bought a stock, he also bought a put option with a certain price and time limit. The utility of put option is that when the stock price falls below the option-limited price, the holder of seller option can sell his stock at the option-limited price, thus hedging the risk of stock decline. In another hedging operation, the fund manager first chooses a certain kind of bullish industry, buys a few good stocks in this industry and sells a few bad stocks in this industry according to a certain proportion. The result of this combination is that if the industry is expected to perform well, the increase of high-quality stocks will exceed other stocks in the same industry, and the income from buying high-quality stocks will be greater than the loss caused by shorting inferior stocks; If the expectation is wrong, the stocks of this industry will fall instead of rising, then the stocks of poor companies will fall more than the high-quality stocks. Then the profit of short selling will be higher than the loss caused by the decline in buying high-quality stocks. Because of this mode of operation, the early hedge fund can be said to be a form of fund management based on the conservative investment strategy of hedging.
After decades of evolution, hedge funds have lost the original connotation of risk hedging, and the title of hedge funds also exists in name only. Hedge fund has become synonymous with a new investment model. That is, based on the latest investment theory and extremely complicated financial market operation skills, we should make full use of the leverage of various financial derivatives and take high risks. Pursuing a high-yield investment model. Today's hedge funds have the following characteristics:
(1) Complexity of investment activities. In recent years, increasingly complex and innovative financial derivatives such as futures, options and swaps have gradually become the main operating tools of hedge funds. These derivatives were originally designed to hedge risks, but because of their low cost. The characteristics of high risk and high return have become a powerful tool for many modern hedge funds to speculate. Hedge funds match these financial instruments with complex portfolios, invest according to market forecasts, and obtain excess profits under accurate forecasts, or use the imbalance caused by short-term midfield fluctuations to design investment strategies to obtain the price difference when the market returns to normal.
(2) The investment effect is highly leveraged. Typical hedge funds often use bank credit leverage to expand their investment funds several times or even dozens of times on the basis of their original funds in order to maximize their returns. The high liquidity of securities assets of hedge funds makes it convenient for hedge funds to use fund assets for mortgage loans. A hedge fund with a capital of only 10 billion dollars can lend billions of dollars by repeatedly mortgaging its securities assets. The existence of this hit effect makes the net profit after deducting loan interest from a transaction far greater than the possible income from capital operation with only $6,543.8 billion. Similarly, it is precisely because of the leverage effect that hedge funds often face great risks of excessive losses in the case of improper operation.
(3) Private financing. The organizational structure of hedge funds is generally partnership. Fund investors buy shares with funds, provide most of the funds, but do not participate in investment activities; Fund managers join in with funds and skills, and are responsible for the investment decisions of funds. Because hedge funds require a high degree of concealment and operational flexibility, the partners of hedge funds in the United States are generally controlled below 100, and the contribution of each partner is above 100 million US dollars. Because hedge funds are mostly private, they evade the strict requirements of American law on information disclosure of public offering funds. Due to the high risk and complex investment mechanism of hedge funds, many western countries prohibit them from publicly recruiting funds to protect the interests of ordinary investors. In order to avoid the high taxes in the United States and the supervision of the US Securities and Exchange Commission, hedge funds operating in the US market generally register offshore in some areas with low taxes and loose regulations, such as the Bahamas and Bermuda, and are limited to raising funds from investors outside the United States.
(4) The concealment and flexibility of operation. Hedge funds and securities investment funds for ordinary investors not only have great differences in fund investors, fund raising methods, information disclosure requirements, supervision degree, but also have many differences in fairness and flexibility of investment activities. Securities investment funds generally have a clear definition of portfolio. In other words, there is a definite scheme in the choice and proportion of investment tools. For example, a balanced fund means that stocks and bonds are roughly equally divided in the fund portfolio, while growth funds refers to the investment focused on high-growth stocks. At the same time, * * * mutual funds are not allowed to use credit funds for investment, while hedge funds have no restrictions and definitions in these aspects. They can use all operational financial instruments and combinations to maximize the use of credit funds in order to obtain excess returns higher than the average market profit. Hedge funds play an important role in speculation in modern international financial markets because of their high concealment, operational flexibility and leveraged financing effect.
American financier george soros runs five hedge funds with different styles. Among them, Quantum Fund is the largest one and one of several large hedge funds in the world. Quantum Fund was originally founded by Soros and another famous hedge fund, jim rogers, in the late 1960s. At first, its assets were only $4 million. The fund was established in new york, but the investors are all non-American foreign investors, thus evading the supervision of the US Securities and Exchange Commission. Quantum funds invest in commodities, foreign exchange, stocks and bonds, and make extensive use of financial derivatives and leveraged financing to engage in all-round international financial operations. Soros, with his extraordinary analytical ability and courage, guided the quantum fund to grow and develop again and again in the world financial market. He has accurately predicted the extraordinary growth potential of an industry and a company for many times, and thus obtained extraordinary returns in the rising process of these stocks. Even in the bear market where the midfield collapsed, Soros made a lot of money with his superb short-selling skills. After less than 30 years of operation, by the end of 1997, the quantum fund has grown into a giant fund with total assets of nearly 6 billion US dollars. By the end of 1996, the 10000 injected by Quantum Fund had increased to $300 million, an increase of 30,000 times.
Soros became a hot figure in the international financial community because he launched several large-scale currency sniper wars with the help of quantum funds in the mid-1990s. With its abundant financial resources and fierce style, Quantum Fund has been making waves in the international currency market since the 1990s, often attacking currencies with weak foundations and succeeding repeatedly. Although the quantum fund has only $6 billion in assets, it has become a decisive force in the international financial market because it can obtain the investment effect equivalent to tens of billions or even hundreds of billions of funds through leveraged financing and other means when needed. At the same time, due to Soros's fame, the whereabouts and betting direction of Quantum Fund are followed by large-scale international hot money. Therefore, every move of quantum fund often plays a key role in the fluctuation trend of a country's currency. Hedge funds often attack a currency by short-selling it on a large scale in the forward and futures and options markets, thus causing depreciation pressure on the currency. For countries with foreign exchange reserves, after futile market intervention, the only way left is often to devalue their currencies, so that short hedge funds can make a lot of money. Soros and his quantum fund were directly responsible for several serious currency crises in the 1990s.
In the early 1990s, in order to cooperate with the linked exchange rate within the European Union, the exchange rate of the pound was artificially fixed at a high level, which triggered an attack from international currency speculators. Quantum Fund took the lead in launching an attack, selling pounds on a large scale in the market and buying German marks. Although the Bank of England made great efforts to throw out the Deutsche Mark to buy the pound, accompanied by measures to raise interest rates, it was defeated by the attack of the Quantum Fund, and the pound was forced to withdraw from the European currency exchange rate system and float freely. In just 1 month, the exchange rate of the pound fell by 20%, and the quantum fund made huge gains of hundreds of millions of dollars in this pound crisis. Not long after that, the Italian lira suffered the same fate, and the Quantum Fund also played the leading role.
1994 Soros quantum fund attacked Mexican peso. Before 1994, the healthy growth of Mexico's economy was based on excessive dependence on short-and medium-term foreign loans. In order to control domestic inflation, the peso exchange rate is overvalued and pegged to the US dollar. The attack on the peso initiated by Quantum Fund led to the collapse of Mexico's foreign exchange reserves in a short time, and it had to abandon its peg to the US dollar and float freely, leading to the collapse of the Mexican peso and the domestic stock market. Quantum Fund made a lot of money in this crisis.
1997 In the second half of the year, a financial crisis occurred in Southeast Asia. Mexico, Thailand, Malaysia, South Korea and many other Southeast Asian countries, such as 1994, have long relied on short-term and medium-term foreign debts to maintain the balance of international payments, with high exchange rates, and most of them maintain fixed or linked exchange rates with the US dollar or a basket of currencies, which provides a good opportunity for international speculative funds. Quantum fund played the role of an attacker, starting with a large number of short selling of Thai baht, forcing Thailand to abandon its long-term fixed exchange rate linked to the US dollar and float freely. This triggered an unprecedented crisis in Thailand's financial market. The crisis quickly spread to all countries and regions in Southeast Asia where currencies are freely convertible, forcing all major currencies in Southeast Asia to depreciate sharply in a short time. The collapse of different monetary systems and stock markets in Southeast Asia, as well as the huge pressure of foreign capital withdrawal and domestic inflation, cast a shadow over the economic development of this region.
At present, there is no hedge fund in this sense in China