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1、Financial Markets and Financial Institutions-Part II,Guojun Wang (王国俊), Ph.D. School of Economics and Management Tongji University Email: Wechat: GuojunWangEcon Office: Room 1616, Tongji Building, Suite A,About Me,Joined Tongji in September, 2014 Education Background UC Davis Ph.D. in Economics UC
2、Berkeley Exchange student in the finance Ph.D. program University of Central Florida M.S. in Financial Mathematics Zhejiang University B.S. &M.S. in Mathematics Working Experience Quantitative Strategies Group-CalPERS (largest US public pension fund) Hedge Fund Group-China Investment Corporation (so
3、vereign wealth fund of China) Infrastructure Investment Group-CalSTRS (2nd largest US public Pension fund) Fixed Income Group-Matthews Asia (top 5 Asia-focused mutual fund) Morgan Stanley,Course Plan,Hedge funds Introduction Performance measurement Private Equity and Venture Capital Introduction Per
4、formance measurement Performance Measurement of institutional investors Risk Factor Models Sharpes Style Analysis,Todays Plan,Introduction of Hedge Funds What is a hedge fund? Industry Overview Investment strategies Why invest in hedge funds? Performance Evaluation of Hedge Funds (and Mutual Funds)
5、Asset pricing models with lags Fung-Hsieh Seven Factor model Luck or Skill?,What is a Hedge Fund?,It is a tool that delivers reliable returns for pensions, university endowments, and others It is a tool that creates value to help fund pensions, universities and non-profits It is a tool that institut
6、ions and investors use to manage risks It is a tool that helps diversify investments,Simple Put,It is a toll that helps millions meet their financial goals and obligations,First Hedge Fund Created in 1949,Sociologist Alfred Winslow Jones, writing on assignment for Fortune, bought undervalued securit
7、ies and shorted other stocks as a “market neutral” approach to investing. By combining short selling, leverage, and incentive fees in combination, Jones was able to deliver solid returns while minimizing risk. His innovative approach created the first hedge fund.,Typical U.S. Hedge Fund Structure,Wh
8、o Can Invest in Hedge Funds? (US Case),Accredited Individual Investors: Individuals with investments in excess of $5 million; or net worth of at least $1 million; or income of at least $200,000 in last two years Accredited Institutional Investors: Institutions with total assets over $5 million; or n
9、o less than $25 million in investments or investable assets.,Who Invest in Hedge Funds?,About 61% percent of global hedge fund assets come from institutional investors such as pension funds, and university and nonprofit endowments. The rest comes from individual investors Source: Preqin Ltd., April
10、2011,Who Invest in Hedge Funds?,University Endowments Among the first institutional investors that invest in hedge funds, e.g. Yale Endowment About 20% allocation to hedge funds in 2014 (source: 2014 NACUBO-Commonfund Study of Endowments) Elite Institutions and large endowments allocate more to hedg
11、e funds (source: Barber and Wang (2013) Pension Plans (public pensions and corporate pensions) Accounts for 53% of institutional invest assets held by hedge funds-a total of $594 billion-as of March 30, 2011. (source: Citi Prime Finance),Top 100 Hedge Funds Managed $1.5 Trillion (as of May 2014),Fee
12、s,Used to be a 2+20 structure: 2% management fee+20% incentive Declined to 1.5+17 recently,Hedge Fund Outperformed Risky Assets,Hedge Funds outperformed risky assets on a risk adjusted basis,But Hedge Funds Underperformed Over the Last Six Years,Hedge Funds also Underperformed on a Risk Adjusted Bas
13、is over the Last Six Years,Hedge Funds Strategy: Global Macro,Investment managers use economic variables and the impact these have on markets to develop investment strategies. Managers employ a variety of techniques including discretionary and systematic analysis, quantitative and fundamental approa
14、ches, and long and short-term holding periods. Strategies are based on future movements in underlying instruments rather than the realized valuation discrepancies between securities.,Hedge Funds Strategy: Event Driven,Investment managers maintain positions in companies currently or prospectively inv
15、olved in corporate transactions including mergers, restructurings, financial distress, tender offers, shareholder buybacks, debt exchanges, security issuance or other capital structure adjustments. Managers pursue strategies based on fundamental characteristics (as opposed to quantitative) and speci
16、fic future developments. Position exposure includes a combination of sensitivities to equity markets, credit markets and company-specific developments.,Hedge Funds Strategy: Relative Value,Investment managers maintain positions based on valuation discrepancy in the relationship between multiple securities. Managers employ a variety of fundamental and quantitative techniques; investments range broadly across equity, fixed inco
