Module 6 · Alternative Investments

Hedge Funds

EN: Hedge fund strategies, fee structures, and key risks.
VN: Chiến lược hedge fund, cấu trúc phí, rủi ro chính.

1. Strategy Categories Concept

About: Equity hedge, event-driven (M&A, distressed), relative value (FI/conv arb), macro/CTA, multi-strat. Different return drivers and correlations.Tóm tắt: Equity hedge, event-driven, relative value, macro/CTA, multi-strat.

Equity hedge Long/short equity, market neutral, dedicated short.
Event-driven Merger arbitrage, distressed, activist, special situations.
Relative value Fixed-income arbitrage, convertible arbitrage, volatility.
Macro / CTA Discretionary macro, systematic / managed-futures.
Multi-strategy Combine multiple approaches.

2. Fee Mechanics Concept

About: '2 and 20' typical. Hurdle (soft vs hard), high-water mark (only on net new highs). Sequence dependence — investors entering after drawdowns benefit.Tóm tắt: 2/20. Hurdle (soft/hard), HWM. Vào sau drawdown lợi hơn.

2 and 20 Most common — 2% mgmt + 20% performance.
Hurdle rate Soft (carry on full profit if exceeded) vs hard (carry only on profits ABOVE hurdle).
High-water mark Performance fee only on net new highs.

3. Operational Considerations Concept

About: Lock-up (initial), notice (advance), side pockets (illiquid ring-fence), gates (% redemption cap). Liquidity terms = part of risk profile.Tóm tắt: Lock-up, notice, side pockets, gates. Điều khoản liquidity = phần của profile rủi ro.

Lock-up Initial period before redemptions allowed (1–3 years).
Notice period Advance redemption notice (30–90 days).
Side pockets Illiquid positions ring-fenced from main fund NAV.
Gates Limit on fraction of fund redeemable per period.

Practice problem Practice

Practice problem

A fund profits from the spread between an acquirer's stock and a target's stock following a deal announcement. Which strategy?

Show solution

Event-driven: focused on corporate events.

Specifically: merger/risk arbitrage.

Event-driven — merger arbitrage