Global investment manager or generally better known by the term hedge fund is a private collective investment contract subject to performance-based compensation costs (performance fees) and is typically offered in limited to upper-class investors. In the U.S. hedge fund offered only to accredited investors only, and because of this restriction, the hedge funds are exempt from the rules of the SEC, NASD and other regulatory agencies.
Hedge fund activity is restricted by a treaty regulating the management of special funds, so hedge funds can implement complex investment strategies, conduct transactions "long" or "short selling" assets, conduct trade transactions futures, swaps and other derivative transactions or . Hedge funds often do well as hedge their investments against equity and stock price movements, because their main target is to produce returns that are not closely related to the financial markets in general.
In many countries, hedge funds are prohibited from marketing their services to investors who are not accredited do not like the rules on retail investment funds such as mutual funds and pension funds. Hedge fund is a joint asset management company that conducted in private and therefore access to the public market is limited by government regulations so little even there is no obligation for hedge funds to submit their private information to the public.
The term hedge fund comes from a fund founded by Alfred Winslow Jones in 1949. Strategy A.W. Jones' is to sell by way of "short" the shares when he did purchase other shares, so it has been done thus hedge the market risk. Many "base investment", "investment syndicates", "investment partnership" or "opportunistic funds" which have different characteristics in this modern world which has been operating already since a long time. But Jones was the first to perform a combination of short selling, the use of leverage (leverage), a limited partnership structure in order to avoid the rules, and wearing a 20% reward incentives to compensate for his role as "managing partner", and therefore Jones is recognized as the "father" (inventor) of the hedge fund industry.
To this day the hedge is still done by way of stock purchase transactions simultaneously in long and short stock sales, and even some hedge funds do not trade stocks and only conduct transactions in other financial instruments including commodity futures contracts, options, foreign exchange and developing country debt.
Assets managed by hedge fund industry is based on data published by Chicago-based Hedge Fund Research Inc. (Hfr) in the second quarter of 2006 in total worth 1225 billion USD. This figure rose by 20% from the previous year and doubled compared to 2003. on the previous year and Nearly twice the total three years Earlier.
Because hedge funds use "leverage" or using debt to invest, the position of transactions that can do the financial market is greater than the actual assets being managed.
Hedge funds in the United States has gradually become "active shareholder" in a way mengamblil substantial portion of shares in the takeover of the company and make or take any pressure on management performance improvement.
Performance-based compensation, or more commonly known as a performance fee, calculated on a percentage based on the profits / earnings yield obtained as a result of managed funds, so that the greater the results obtained, the greater the reward obtained by hedge funds. In general, hedge funds put on this performance fee of 20% of the gross revenue received, but the cost range is very wide and varies even on well-known hedge fund fees are subject to even greater.
Manager of managers plead that the performance-based compensation helps to align the interests of manager and investor interests are better than those with a reward system of "flat", which still must be paid despite poor performance. But the imposition of performance-based compensation, was criticized by many people including prominent investor Warren Buffett as a gift to the manager an incentive to take risks even greater risk that a reversal of large returns in the long term. In an effort to overcome this problem, there is often used a system of "High water mark", where managers only earn returns if the value of funds under its management have achieved the highest net value than ever achieved in the previous period.
Some hedge funds use a hurdle rates system whereby fees would not be subject to annual performance of managed funds exceed a reference value such as government bonds or a fixed percentage at a certain time period.
Legal structure used in determining the tax liability for investors. Many hedge funds have a legal domicile offshore in countries that do not relate well with the manager, investor, or operational activities of investment funds, with the aim that the tax is only imposed on investors and not subject to additional tax on managed funds.
For investors who become subject to tax in the United States, hedge funds are often made in the structure of "limited partnership" because of this type have a more favorable tax treatment in America. Hedge fund managers (who are usually in the form of a company) is a "general partner" or the manager and the investor is a "limited partners" or members. The funds are collected in a partnership or company and the "general partner" or the manager will make all investment decisions.
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At the end of 2004, recorded 55% of hedge funds, which manage nearly two thirds of the total funds under management, listed in the Offshore Financial Centre. Offshore location is very famous in the Cayman Islands and British Virgin Islands and Bermuda.
Onshore locations are far more important in terms of location of hedge fund managers. City of New York and the Gold Coast in Connecticut (usually Stamford, Connecticut and Greenwich, Connecticut), which is the main location of the hedge fund manager with a total of two times the number of hedge funds located in London.
Many offshore financial centers seems to support the establishment of hedge funds by offering some combination of services, implementation of favorable taxation, regulation that is friendly to the business world with a major financial centers including Cayman Islands, Dublin, Luxembourg, British Virgin Islands and Bermuda. It is estimated that the Cayman Islands is a center of about 75% of the hedge fund world, which controls nearly half the market share of hedge fund industry with an estimated value of USD 1.225 trillion
Some hedge funds, mainly in America, do not use the services of a third party as the custodian bank that holds their assets, which can bring the impact of conflicts of interest and in more extreme cases can lead to fraud.
Government bonds commonly referred to as "risk-free bonds" because the government of a state to raise taxes or print money to pay the bond payment at maturity. Indeed there are records in which this government bonds have failed to pay as happened in Russia in 1998 the government called Russia's financial crisis, although this is very rare to happen.
For example, in U.S. government bonds, called "Treasury securities" are denominated in U.S. dollars and an investment in the U.S. dollar risk-free. In this case is' risk free "is meant safe from credit risk. But still there are other risks such as exchange rate risk for foreign investors in which the value of U.S. dollar is weakening against other currencies. Also on the risk of inflation which at maturity repayment of these bonds gained value investors weakened purchasing power due to inlasi greater than the yield obtained. Many governments issue inflation-indexed bonds that protect investors against inflation risk.
Government bonds may also contain risks if issued by the government of a country whose country has the capability of financial policies that are less good. Suppose the only Bulgarian who has a dependency on the world economy and world economic institutions than other countries such as America. Some of these state bonds rated A-scale after 2004. In February February 2006 Standard & Poor's assigned a rating terjadap Bulgarian long-term debt in domestic currency at BBB + scale. And this ranking is a result for several decades has decreased the risk (and an increase in ratings).
Government bonds issued by an institution that is part of the finance department of a country, for example:
Bund is a bond issued by the German Financial Institutions, denominated in euro
Gilts are bonds issued by the UK Debt Management Office (UK Debt Management Office) denominated in sterling
U.S. Treasuries are bonds issued by the Bureau of the Public Debt (Bureau of Public Debt)
Hopefully this little biased onformasi and useful for you all who like to invest in global markets, although this information might be a little late I write.
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