Azioni tech: ecco chi è l'hedge fund che ha fatto +223% con gli short (2024)

FAQs

What is one disadvantage of a hedge fund? ›

- High Fees: Hedge funds typically charge high fees, including management fees and performance fees, which can erode returns over time. - Lack of Transparency: Hedge funds are not required to disclose their holdings or strategies, which can make it difficult for investors to evaluate their performance and risk.

Long-short equity is commonly used by hedge funds, which often take a relative long bias—for instance, a 130/30 strategy where long exposure is 130% of AUM and 30% is short exposure.

To short a stock, a hedge fund will borrow shares of the stock in question (usually from their prime broker) and sell them to other investors who are willing to pay the market price. Then, as the stock price falls, the hedge fund will buy the same shares at a lower cost and pocket the difference.

Short selling—also known as “shorting,” “selling short” or “going short”—refers to the sale of a security or financial instrument that the seller has borrowed. The short seller believes that the borrowed security's price will decline, enabling it to be bought back at a lower price for a profit.

While hedge funds are only lightly regulated and carry high inherent risks, funds of hedge funds are thought to offer security because professional managers are picking the hedge funds that make up the pools.

But lately, Wall Street has been wondering if hedge funds have reached Peak Pod. Returns dropped markedly at many multistrats in 2023. The average fund in the class returned 5.4%—even as the Nasdaq Composite and the S&P 500 cranked out total returns of 45% and 26%, respectively.

A common example of the volatility of short selling is that if the asset price drops on the market the hedge fund will be able to profit on the difference, but if the asset increases in value then it will have to pay the difference, which can lead to severe losses.

Hedge funds are versatile investment vehicles that can use leverage, derivatives, and take short positions in stocks. Because of this, hedge funds employ various strategies to try to generate active returns for their investors. Hedge fund strategies range from long/short equity to market neutral.

Hedge funds have always had a significant failure rate.

The squeeze was exacerbated by several hedge funds shorting more shares than the available float of shares in the market, making it nearly impossible to cover all their short positions. 5 This added immense pressure to buy back shares at any available price, further pushing up the stock price.

How do hedge fund managers get so rich? ›

Hedge fund managers typically earn above-average compensation, often from a two-and-twenty fee structure. Hedge fund managers typically specialize in a particular investment strategy that they then use to power their fund portfolio's mandate for profits.

The money is a big draw as well: if you're at the right fund and you perform well, you can earn into the mid-six-figures, up to $1 million+, even as a junior-level employee. The top individual Portfolio Managers can earn hundreds of millions or billions each year.

Hedge funds are actively managed by professional managers who buy and sell certain investments with the stated goal of exceeding the returns of the markets, or some sector or index of the markets. They take the greatest risks while trying to achieve these returns.

There is no mandated limit to how long a short position may be held. Short selling involves having a broker who is willing to loan stock with the understanding that it is going to be sold on the open market and replaced at a later date.

If the shares you shorted become worthless, you don't need to buy them back and will have made a 100% profit. Congratulations!

These disadvantages include: Reduced profit potential: Hedging forex is primarily focused on risk management, which means that while it limits losses, it also limits potential profits. The hedging positions may offset each other, resulting in limited gains.

The biggest and most obvious risk is the risk of investors losing some or all of their investment. A key quality of hedge fund investment risk is the virtual Wild West landscape of the hedge fund industry (though strides have been made since the 2008 financial crisis).

Downside protection often involves the purchase of an option to hedge a long position. Derivative-based forms of downside risk protection are often looked at as paying premiums for "insurance"—a necessary cost for some investment protection.

Enormous fees – lucrative for the hedge fund manager but not for you. Not transparent – delayed and partial information about your holdings. Not liquid – takes a long time to get your money back. Very tax inefficient – large and unpredictable obligations for taxable investors.