The hedge fund industry in South Africa is currently unregulated, which is generally considered a hindrance by hedge fund managers. Some fund managers are under the impression that regulation will bring more credibility to the industry and, in turn, increase investment into this sector. The feeling is that many investors shy away from this unregulated market as there are no procedures in place to ensure that their funds will be properly managed and that, currently, investors have no recourse should the investment be mismanaged.How one applies the regulation will have profound implications. Due to their global nature, the impact of regulations with regards to both local and foreign hedge funds also needs to be addressed. The implication of regulating the industry needs to be addressed from all aspects, including, for example, cost and industry agility.Although the South African government has been threatening to regulate the industry since 2001, it has yet to do so. Recently, there has been renewed hope that the government will introduce regulations to the industry; however, some fund managers are skeptical. / Dissertation (MBA)--University of Pretoria, 2010. / Gordon Institute of Business Science (GIBS) / unrestricted

<p.This study explores the extent and benefit of corporate hedging in South Africa by examining the disclosure of financial derivative instruments in the annual reports of non-financial companies listed on the JSE. The conflicting academic theory on hedging and the shortage of empirical evidence to support corporate hedging provide decision-makers, especially in South Africa, with poor information on the impact of hedging on the market value of their companies and, therefore, the total return provided to their shareholders. A database of derivative usage was constructed from the annual reports of all non-financial JSE-listed companies. The data was used to quantify the extent of derivative usage in South African and to construct the portfolios necessary to calculate the risk factors for the regression model. The Fama and French four-factor model was used as the basis for the regression analysis necessary to show whether or not hedging has a positive impact on annual stock price performance. The results show that hedging is prevalent in South Africa. However, the results provide evidence that corporate hedging through the use of derivative instruments is only a value-adding strategy for firms that exclusively use currency derivatives. The use of commodity or interest rate derivatives is not a value-adding strategy, nor is the use of currency derivatives in conjunction with commodity or interest rate derivatives. / Dissertation (MBA)--University of Pretoria, 2010. / Gordon Institute of Business Science (GIBS) / unrestricted

As a nation, Canada has claimed global success in financial services in many ways. However, the scale of the Canadian hedge fund industry is incomparable to that of London and New York. Although it only holds 1.5% of global hedge fund assets, the Canadian hedge fund industry has the ingredients to become a leader among its peers. During the past ten years, several external factors (including changes in technology, the 2008 economic crash, and trends in outsourcing) have had an effect on financial services worldwide, but there are also internal factors specific to Canada that have directly contributed to the industry’s lack of scale. The thesis uses cluster concepts to gain an in-depth understanding of these patterns and identify the causes for the Canadian hedge fund industry’s lack of scale. However, cluster concepts are only useful to a limited extent in explaining the emergence, sustenance, and decline of financial services clusters. Historically, cluster concepts as explored by Marshall (1890), Porter (1990), and Piore and Sabel (1984) have been used to explain the successes and failures of manufacturing industry clusters, but these theories have been infrequently used to explain financial services industries. The dispersion of clusters due to globalization, advancements in technology, and deglomeration has made it even more challenging to identify, measure, and evaluate cluster behaviour in general, but especially in the financial services industry. Therefore, in addition to traditional cluster theories, this thesis seeks to evaluate the dynamics of the Canadian hedge fund cluster using newer theories such as New Economic Geography and the concepts of dispersion and deglomeration in order to explain Canadian hedge funds’ lack of scale. The thesis explores the main ingredients for cluster formation and growth, as well as the opposing arguments of cluster dispersal. A mixed-methods approach was used, employing semi-structured interviews and secondary analysis. Endogenous causes specific to Canada were isolated and investigated through data analysis. Throughout this study, the task of cluster facilitation was explored in order to identify the key role that each individual participant plays within the Canadian hedge fund industry. The present research is the first of its kind, and could open up possibilities for further study. The core of future research could be focused on the cluster measurement and identification of cluster borders. Another research stream could attempt to deepen understanding of the feasibility of each recommendation listed in this research. This could involve more detailed, exploratory quantitative and qualitative work that could quantify the cost and benefits of promoting hedge funds in Canada.

I examine the impact of hedge fund managers selling ownership stakes in their firms to outside owners. Funds with outside owners do not subsequently outperform a matched sample of funds but do attract higher flows, suggesting that managers sell stakes to obtain strategic growth partners. The flow impact is greater for i) funds with lower prior flows or performance, ii) smaller funds, and iii) funds with more reputable outside owners. Outsiders also monitor their investments as funds with outside owners reduce their returns management. The reduction in return management is stronger after the 2008 financial crisis when institutions’ reputations are more tarnished. Combined, the results indicate that outside ownership benefits managers, outsiders, and fund investors.

by Kam Tsz-Chung, Narayanan Kamakodi. / Thesis (M.B.A.)--Chinese University of Hong Kong, 2000. / Includes bibliographical references (leaves 45-46). / ABSTRACT --- p.ii / TABLE OF CONTENTS --- p.iii / ACKNOWLEDGEMENT --- p.iv / Chapter / Chapter I. --- INTRODUCTION --- p.1 / Asian Crisis 1997 --- p.1 / Project Objectives --- p.2 / Report Structure --- p.2 / Methodology --- p.3 / Chapter II. --- ESSENTIALS OF HEDGE FUNDS --- p.4 / What is a Hedge Fund? --- p.4 / Common Characteristics of Hedge Funds --- p.5 / Comparison of Hedge Funds and Traditional Investment Tools --- p.7 / Popular Misunderstanding --- p.7 / Eight Investment Styles --- p.8 / Fund Structures --- p.12 / Fees --- p.13 / The Rule of Game --- p.13 / Risk Hedging Mechanism by Hedge Fund --- p.14 / Difference Between Hedge Fund and Mutual Fund --- p.14 / Chapter III. --- HEDGE FUND INDUSTRY --- p.16 / Evolution of Hedge Funds --- p.16 / "Number, Size, and Location of Hedge Funds" --- p.16 / Recent Performance --- p.17 / Closing Down of Tiger Management LLC --- p.18 / Supervision and Regulation --- p.18 / Hedge Fund Managers --- p.21 / Hedge Fund Institutions --- p.21 / Chapter IV. --- LITERATURE REVIEW --- p.22 / Returns of Hedge Funds --- p.22 / Chapter V. --- CASE STUDY ON A FAMOUS HEDGE FUND --- p.24 / Long-Term Capital Management --- p.24 / Chapter VI. --- PERSPECTIVES IN ASIAN-PACIFIC REGION --- p.28 / A Survey on Hedge Funds --- p.28 / An Interview with a Hedge Fund Manager in Hong Kong --- p.31 / An Interview with a Fund Manager in Hong Kong --- p.33 / An Interview with the Financial Secretary of HKSAR Government --- p.36 / Chapter VII. --- RECOMMENDATION AND CONCLUSION --- p.37 / General Roles of Hedge Funds in the Financial Market --- p.37 / Specific Roles of Hedge Funds in Asian-Pacific Region --- p.38 / Conclusion --- p.38 / Recommendation --- p.39 / APPENDIX --- p.41 / BIBLIOGRAPHY --- p.45

This study examines systematic patterns in returns reported by hedge funds for the period from 1989 to 2003. Two patterns are examined: strategic changes in returns variance in the second half of the year and the avoidance of reporting small losses. The hedge fund industry has grown rapidly during the 1990s. Despite this rapid growth, and the large amount of investment in hedge funds, hedge funds are less regulated than other forms of investment. Given the lower level of regulation and the assumed ability of hedge fund managers to influence both investment policy and the estimation of value for illiquid assets included in the calculation of returns, I predict systematic patterns in hedge fund returns. Brown, Goetzmann and Park (2001) show that funds that perform poorly compared to their peers tend to adopt more risk in subsequent periods while funds that perform relatively well tend to adopt less risk. I replicate this result in a larger and more recent database of hedge fund returns. The strategic use of variance is more visible in the latter half of the fifteen year period examined. This result is consistent with increased investor scrutiny and competition between hedge funds in recent years. Burgstahler and Dichev (1997) show that public companies tend to avoid reporting small losses. I show that the well documented discontinuity around zero seen in public company earnings distributions is also found in the distribution of hedge fund returns. This is consistent with hedge fund managers facing similar pressure to public company managers to avoid reporting small losses, and managers having the ability to influence reported returns in a less regulated environment.

Background: Hedge funds as an alternative investment are a rapidly increasing market. The change in the financial climate during the last ten years has created a greater awareness of hedge funds. Hedge funds in contrast to other funds has the ability to invest in all kinds of securities like stocks, bonds, derivatives and currencies and by combining hedge funds in a portfolio one can reduce the risk while increase the return. We found an interest in the subject because we realized that there is a lack of studies made on hedge funds in Sweden. Purpose: The aim for this study is to analyze the hedge funds that are present on the Swedish market in terms of investment strategies and performance. We aim to statistically investigate whether or not there is more general investment strategies present on the Swedish market. The objective is to investigate whether or not the Swedish market differ from the international market. Method: The method used in this study is quantitative with a deductive approach. We have studied several previous studies and the literature in order to find the best statistical methods and to form appropriate hypotheses. Since the Swedish hedge fund market is relatively small, we are going to study a whole population. To find the hedge funds that is active on the Swedish market we have compiled lists from two financial magazines and the Swedish fund statistics. The main statistical tools used to analyze our data are the Principal Component Analysis and the Pearson correlation coefficient. Conclusions: We found that there are some differences between the Swedish hedge fund market and the global market. The Principal Component Analysis proved that there is possible to derive five different investment strategy groups on the Swedish hedge fund market. However, these strategies are not as mutually exclusive as one would expect due to their possibility to use several dynamic trading strategies. We found that one investment strategy is dominating the market. This is not consistent with international studies. We also found that the Swedish market is not performing as well as the international market. Internationally hedge funds have a growth rate of 20 percent annually while hedge funds on the Swedish market have a growth rate of 20 percent over three years. Due to the fact that we found that the Swedish hedge fund market is relatively homogenous and that Swedish hedge funds provide a lower yield than international funds we concluded that hedge funds on the Swedish market is not acting in accordance to theory. / Bakgrund: Under de senaste 10 åren har hedge fonder och dess marknad successivt ökat i popularitet och storlek. Detta har skett som en följd de förändringar som skett i vår finan-siella miljö. Hedge fonder i kontrats till traditionella fonder har möjligheten att investera i fler olika finansiella instrument så som aktier, obligationer, derivat och valutor. Genom att kombinera hedge fonder i en portfolio kan man reducera risken samtidigt som man ökar avkastningen. Vårt intresse i ämnet väcktes på grund av bristen av forskning på hedge fon-der i Sverige. Syfte: Syftet med vår studie är att analysera de hedge fonder som är aktiva på den Svenska marknaden i form av investerings strategier och utveckling. Vi syftar till att statistiskt undersöka om det finns generella investerings strategier på den Svenska marknaden. Målet är att undersöka om den svenska marknaden skiljer sig ifrån den internationella marknaden. Metod: Vi har använt kvantitativ metod med ett deduktivt synsätt. För att hitta de bästa statistiska metoderna och för att kunna forma lämpliga hypoteser har vi har studerat flera tidigare studier och litteratur inom ämnet. Eftersom den svenska hedge fond marknaden är relativt liten kommer vi att undersöka en hel population. De hedge fonder som är aktiva på den svenska marknaden har vi hittat genom att sammanföra listor från två finansiella tidningar och en lista över hedge fonder från Svensk Fondsstatistik. Vi kommer i huvudsak att använda en Principal Komponent Analys och Pearsons korrelations koefficient. Slutsats: Vi kom fram till att det finns vissa skillnader mellan den svenska marknaden och den globala marknaden. Principal Komponent Analysen påvisade att det är möjligt att identifiera fem olika investerings strategier på den svenska hedge fond marknaden. Dock är dessa strategier inte så olika som förväntat på grund av deras möjlighet att använda flera dynamiska investerings strategier. Det visade sig att en investering strategi dominerar marknaden vilket inte överstämmer med andra internationella studier. Vi kom också fram till att svenska hedge fonder inte visar samma positiva utveckling som internationella hedge fonder när det gäller utveckling. Internationella hedge fonder har en avkastning på 20 procent årligen medan Svenska hedge fonder har en avkastning på 20 procent över tre år. På grund av att vi kom fram till att svenska hedge fond marknaden är relativt homogen och att svenska hedge fonder har en lägre avkastning än internationella hedge fonder så drar vi slutsatsen att svenska hedge fonder inte följer de generella hedge fond teorierna.

The purpose of the thesis aims to investigate pair trading strategies which are frequently used by hedge funds adopting non-directional strategies. It is also our intention to develop a set of streamlined operational guidelines for pair trading strategy to be implemented in the Taiwan securities markets. Daily closing prices of listed stocks are used. The database is compiled by Taiwan Economic Journal, covering companies listed on the Taiwan Stock Exchange and the GreiTai Market in Taiwan. The company-pairs are selected from firms listed on the same market, conducting business in the same product field, and with sample correlation coefficient higher than 0.7. We choose 10 sample company-pairs covering 20 listed companies. The trading strategies mix both divergence and convergence rules. For the former, when the price ratio of the pair exceeds the moving average price ratio plus (minus) 0.3 standard deviation, we buy the strong and short the weak to anticipate the price ratio trend continues. For the latter, when the price ratio goes beyond the moving average price ratio plus (minus) 1.7 standard deviations, we buy the weak and short the strong, anticipating the price ratio to go back to normal. The exit rules are based on absolute dollar profit, absolute dollar loss, and prolonged position period. The research results show that the pair trading strategies are not risk-free. Risk arises when the price ratio trend runs adversely than as expected. To control the risk, our challenges lie in fine tuning the entry and exit rules. With larger sample size and more in-depth investigation, we expect that the profit/loss ratio of the stragtegy can be improved. Then the pair trading strategy will become a good alternative for conservative individual investors seeking low risk investment opportunities to participate in the securities markets in Taiwan.

Hedge fund performance is modeled from publically available data using feed-forward neural networks trained using a resilient backpropagation algorithm. The neural network’s performance is then compared with linear regression models. Additionally, a stepwise factor regression approach is introduced to reduce the number of inputs supplied to the models in order to increase precision. Three main conclusions are drawn: (1) neural networks effectively model hedge fund returns, illustrating the strong non-linear relationships between the economic risk factors and hedge fund performance, (2) while the group of 25risk factors we draw variables from are used to explain hedge fund performance, the best model performance is achieved using different subsets of the 25 risk factors, and, (3) out-of-sample model performance degrades across the time during the recent (and still on-going) financial crisis compared to less volatile time periods, indicating the models’ inability to predict severely volatile economic scenarios such as economic crises.

Hedge fund performance is modeled from publically available data using feed-forward neural networks trained using a resilient backpropagation algorithm. The neural network’s performance is then compared with linear regression models. Additionally, a stepwise factor regression approach is introduced to reduce the number of inputs supplied to the models in order to increase precision. Three main conclusions are drawn: (1) neural networks effectively model hedge fund returns, illustrating the strong non-linear relationships between the economic risk factors and hedge fund performance, (2) while the group of 25risk factors we draw variables from are used to explain hedge fund performance, the best model performance is achieved using different subsets of the 25 risk factors, and, (3) out-of-sample model performance degrades across the time during the recent (and still on-going) financial crisis compared to less volatile time periods, indicating the models’ inability to predict severely volatile economic scenarios such as economic crises.