The Fundamentals of Hedge Funds

Training Description

The Fundamentals of Hedge Funds

This training provides a fundamental analysis of hedge funds, their strategies, and their advantages and constraints within an investment portfolio.

Understanding Hedge Funds

Hedge funds are alternative investment funds that use various strategies to generate returns while managing risks. You will explore their functioning and their role in financial markets.

Advantages and Constraints of Hedge Funds

Investment flexibility, but also regulatory constraints and specific risks: we will analyze the main strengths and limitations of these funds.

Hedge Fund Strategies

• Long/Short Equity
• Market Neutral
• Global Macro
• Event Driven
• Managed Futures

We will explore these strategies and their impact on fund management.

Training Objectives

• Understand what a hedge fund is.
• Grasp the advantages and constraints of a hedge fund.
• Learn about the different types of hedge fund strategies.
• Comprehend performance and risk assessment methods related to hedge funds.
• Identify the benefits and limitations of hedge funds within asset allocation.
• Master the necessary methods and adjustments for analyzing the statistical properties of hedge fund returns.

Training Description

The Fundamentals of Quantitative Finance

I. Key Characteristics and Challenges

• Definition
• Main characteristics
• Advantages and constraints

Quiz:

II. Typology of Hedge Fund Strategies

• Equity
• Event-driven
• Relative value
• Opportunistic
• Specialist
• Multi-strategy

Quiz:

Match an example of a strategy to the correct hedge fund category.

III. Performance Analysis of Hedge Funds

• Hedge fund typology based on risk and performance factors
• Risk and performance ratios and indicators:
• • Sharpe
  • Sortino
  • Jensen's Alpha
  • Max Drawdown
• Multi-factor models

Case Study:

Analyze and explain different performance ratios.

IV. Hedge Funds and Asset Allocation

• Role of hedge funds in asset allocation:
• • Enhancing performance
  • Reducing risk and correlation
  • Protection against inflation
• Choosing the right investment vehicle
• Constraints related to hedge funds
• Allocation methods

Specific Statistical Properties:

• Skewness, Kurtosis, Fat Tails, Survivorship Bias
• Return and correlation
• Multi-factor models
• Monte Carlo simulations
• Mean-variance optimized models
• Conditional Value at Risk (CVaR)

Case Study:

Analysis of the causes of the collapses of LTCM (1998), Amaranth Advisors (2006), and Archegos Capital Management (2021).