fm hedge funds and its relavence

8/6/2019 FM hedge funds and its relavence

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Goa Institute of Management

Sanquelim, Goa

Hedge Funds and its Relevance

Financial Management - I

Submitted by

Group 34; Sec C

Mayank Gorla (2010148)Niraj Shirsat (2010152)

Praveen Trivedi (2010156)Puneet Kapoor (2010160)Sandeep Datla (2010164)

Shinam Khatri (2010168)


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Table of Contents

ABSTRACT........................................................................................................................3

INTRODUCTION.................................................................................................................3

HISTORY...........................................................................................................................3

RISK MITIGATION ABILITY AND ADVANTAGES....................................................................4

INVESTMENT METHODS AND STRATEGIES.......................................................................4

RISK INVOLVED IN HEDGE FUNDS.....................................................................................7

REDEMPTIONS AND LOCKUP PERIODS.............................................................................8

REGULATION OF HEDGE FUNDS MARKET & ASSOCIATED ISSUES.....................................8

Regulatory Scenario in India..............................................................................................9

The US Market..............................................................................................................10

The EU.........................................................................................................................10

GLOBAL TRENDS IN HEDGE FUNDS................................................................................10

DATA ANALYSIS..............................................................................................................11

HEDGE FUNDS AND PRIVATE EQUITY.............................................................................14

CONCLUSION..................................................................................................................21

EXHIBITS........................................................................................................................22

Exhibit 1 : Performance of top hedge funds in Convertible Arbitrage, Distressed securities and

Event driven categories...................................................................................................22

Exhibit 2 : Performance of top hedge funds in Equity category..............................................23

Exhibit 3 : Performance of top hedge funds in Fixed Income category....................................24

REFERENCES.................................................................................................................27


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ABSTRACTHedge funds are important actors in the global economy that managed 1.7 trillion dollars in 2009, a 13%

increase compared to 2008 and down from 2.1 trillion in 2007. It is estimated that 9,400 hedge funds areoperating worldwide, a reduction of more than 1,000 funds from the 2007 peak, due to the financial crisisduring which three quarters of hedge funds suffered an average 15.7% loss.

Although the industry has faced some difficulties over the past two years, hedge funds play an important rolein the global financial system. They assure efficiency in capital markets, they are a significant source ofliquidity, and they absorb financial risks. The benefits these investment vehicles bring to the markets areessentially made possible by flexible and light regulatory regimes. Unlike registered investment companies,they escape most of the disclosure, reporting and leverage requirements.

Hedge funds didnt cause the current crisis, yet there seems to be a consensus among regulators around theworld for more regulation. One may wonder why that is and whether regulators are not confusing targets. Therationale behind this desire to take action is twofold.

The first concern is systemic risk, which we define here as the risk of chain reactions of failures. The currentcrisis has shown that markets are deeply interconnected and rely on one another. The size and complexity ofhedge funds may make some of them systemically significant and likely to provoke chain reactions that couldlead to a generalized collapse of financial markets.

The second concern that according to regulators justifies hedge regulation is the need to achieve greater

transparency and cure informational asymmetries in order to guarantee an appropriate level of investor

protection.

In this paper, we discuss the return and performance of various hedge funds and also the regulations in placeon the hedge funds in various countries.

INTRODUCTIONTo hedge means to minimize risk or insulate oneself. Conventionally the term 'hedge fund' is used to refer toa type of private investment vehicle that invests all or most of its assets in publicly traded securities andhedges the investors risk from market exposure. These investment vehicles are commonly structured aslimited partnerships in which the investment manager, or the investment manager's capital managementcompany, acts as the general partner while the investors act as the limited partners. These funds arealternative investment vehicles and are generally available to high net worth individuals and institutionalinvestors. For the investors who make up the fund, there is usually little or no market liquidity. In fact theyusually have a minimum lock in period ranging from one to three years.

HISTORYThe official starting point for hedge funds was 1949 when Alfred Winslow Jones opened an equity fund thatwas organized as a general partnership to provide maximum latitude and flexibility in constructing a portfolio.The fund was converted to a limited partnership in 1952. Jones took both long and short positions in securitiesto increase returns while reducing net market exposure and used leverage to further enhance theperformance. Today the term hedge fund takes on a much broader context, as different funds are exposedto different kinds of risks. Jones merged two investment toolsshort sales and leverage. Short selling wasemployed to take advantage of opportunities of stocks trading too expensively relative to fair value. Jonesused leverage to obtain profits, but employed short selling through baskets of stocks to control risk. Jonesmodel was devised from the premise that performance depends more on stock selection than market

direction. He believed that during a rising market, good stock selection will identify stocks that rise more thanthe market, while good short stock selection will identify stocks that rise less than the market. However, in a


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declining market, good long selections will fall less than the market, and good short stock selection will fallmore than the market, yielding a net profit in all markets.

Hedge fund managers hold a non-traditional belief that is the antithesis of MPT; they believe that there areinefficiencies in the capital markets, performance can be increased without higher risk, and that investorsshould aim for superior returns regardless of the direction of major markets. Hedge funds cannot truly be

considered a separate asset class because the funds do not have a predictable rate of return over time nor dothey as a group respond in a predictable way to distinct economic events.Hedge funds may well offer a reasonable probability of attractive risk-adjusted returns that have strongdiversifying benefits relative to the equity and fixed income markets but, in addition to minimal governmentalsupervision, they also involve leverage, greater asset concentration, investment in possibly illiquidinstruments, limited portfolio liquidity for investors, much less transparency of portfolio holdings, and greaterchance for fraud.

RISK MITIGATION ABILITY AND ADVANTAGESPotential to reduce overall portfolio risk through an additional asset class

Hedge funds represent a different way of managing money with generally low correlations to equity and debt

investments. Adding them to a portfolio of stocks and bonds is likely to reduce overall portfolio risk. Addinghedge funds to an investment portfolio provides diversification not otherwise available in traditional investing.

Potential to provide returns in both up and down markets

Hedge funds are designed for the potential to achieve the positive returns in all market environments. Manyhedge fund strategies have the ability to generate positive returns in both rising and falling equity and bondmarkets.

Potential for superior risk-adjusted performance

Specialized managers are focused on very precise areas of expertise. Greater freedom and flexibility to takeadvantage of investment opportunities than mutual fund managers

Focused on absolute vs. relative performance

Hedge fund managers are only concerned with generating positive returns, as opposed to benchmarking theirperformance against an equity index that could end up in a negative position.

Hedge fund managers are paid by performance

Hedge fund managers' interests are aligned with those of the investor, often with the managers' own capitalinvested.

Broader range of financial instruments at disposal

Huge variety of hedge fund investment styles - many uncorrelated with each other - provides investors with a

wide choice of hedge fund strategies to meet their investment objectives.

INVESTMENT METHODS AND STRATEGIESHedge funds invest in nearly anything: stocks, bonds, private companies, real estate, commodities, and use

various methods to make money regardless of what the markets are doing: investing in options and futures,

distressed or bankrupt companies, privately issued securities, and international markets. They may

concentrate their investments in a single company, issuer, or market for possibly greater gains. They usually

use leverage to try to significantly increase gains, but which can also result in much larger losses. They may

use arbitrage for riskless profits or sell short to profit in a down market. They may also hedge their

investments to protect any gains. They usually combine 1 or more of these methods in their investment

strategy.

Popular strategies used by hedge funds are below:


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Market-neutral strategy aims to balance long positions against short positions. Long positions are taken with

companies that have a high value relative to price and have earnings momentum, while overpriced companies

with falling or negative earnings are shorted. In an up market, the long positions will rise more than the short

positions, and in a down market, the short positions will fall farther than the long positions, leading to a profit

regardless of the direction of the markethence the name.

Statistical arbitrage studies the historical relationship between different securities, such as stocks,commodities, futures, and options, with computer programs and trades those positions that deviate

significantly from past relationships. This method may fail if historical relationships are distorted by forced

selling because of redemptions.

Hedge funds tend to use a lot of leverage to increases profits, but which also increases losses, and can force

the closing of positions when the value of the fund falls below its margin maintenance requirement.

Convertible Arbitrageis a type ofequity long-shortinvesting strategy often used by hedge funds.Instead of

purchasing and shorting stocks, however, convertible arbitrage takes a long position in, or purchases,

convertible securities. It simultaneously takes a short position in, or sells, the same companys common stock.

A convertible security is a security that can be converted into another security at a pre-determined time and a

pre-determined price. In most cases, the term applies to a bond that can be converted into a stock.

The idea behind convertible arbitrage is that a companys convertible bonds are sometimes priced inefficiently

relative to the companys stock. Convertible arbitrage attempts to profit from this pricing error. If the

companys stock price falls, the hedge fund will benefit from its short position; it is also likely that the

companys convertible bonds will decline less than its stock, because they are protected by their value as

fixed-income instruments. On the other hand, if the companys stock price rises, the hedge fund can convert

its convertible bonds into stock and sell that stock at market value, thereby benefiting from its long position,

and ideally, compensating for any losses on its short position.

Distressed Securitiesmay be an attractive investment option for sophisticated investors who are looking for a

bargain and are willing to accept some risk. Distressed securities are securities; most often corporate bonds,

bank debt and trade claims, but occasionally common and preferred stock as well, of companies that are insome sort of distress. Typically, that means heading toward or in bankruptcy.

Typically, a companys debt is considered distressed when its yield to maturity (which is its anticipated rate of

return if it is held to maturity) is more than 1000 basis points above the risk-free rate of return (which is the

return of a risk-free asset such as U.S. Treasuries). A security is also often considered distressed if it is rated

CCC or below by one or more of the major debt-rating agencies, which include Standard &Poors, Moodys and

Fitch.Because their price is reduced, distressed securities are attractive to investors who are looking for a

bargain. Typically, these investors think the company that issued the distressed securities is not in as difficult

a position as the market believes.

Equity market neutral seeks to exploit investment opportunities unique to some specific group of stocks

while maintaining a neutral exposure to broad groups of stocks defined, for example, by sector, industry,market capitalization, country, or region.

The strategy holds long/short equity positions, with long positions hedged with short positions in the same andrelated sectors, so that the equity market neutral investor should be little affected by sector-wide events. Thisplaces a bet that the long positions will outperform their sectors (or the short positions will underperform)regardless of the strength of the sectors. Equity market neutral strategy occupies a distinct place in the hedgefund landscape by exhibiting one of the lowest correlations with other alternative strategies.

Evaluating the Hedge Fund Research index returns for 28 different strategies from January 2005 to April 2009showed that equity market neutral strategy had the second lowest correlation with any of the other strategies,behind only short-bias funds that typically have a negative correlation with all other funds. This result is notsurprising given that each fund utilizes the unique insights of a manager, and these insights are not replicated

across funds

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Some of the available high-yield instruments include extendible/reset securities, increasing-rate notes, pay-in-kind securities, split-coupon securities and usable bonds.

Fixed-Income-Mortgage-Backed funds invest in mortgage-backed securities. Many funds focus solely onAAA-rated bonds. Instruments include: government agency, government-sponsored enterprise, private labelfixed- or adjustable-rate mortgage pass-through securities, fixed- or adjustable-rate collateralized mortgage

obligations (CMO's), real estate mortgage investment conduits (REMICs) and stripped mortgage-backedsecurities (SMBSs). Funds may look to capitalize on security-specific mispricing. Hedging of prepayment riskand interest rate risk is common. Leverage may be used, as well as futures, short sales and options.

RISK INVOLVED IN HEDGE FUNDSHedge funds involve a high degree of risk. It often engages in leveraging and other speculative investmentpractices that may increase the risk of investment loss and can be highly illiquid. They are not required toprovide periodic pricing or valuation information to investors, may involve complex tax structures and delays indistributing important tax information. They are not subject to the same regulatory requirements as mutualfunds, often charge high fees which may offset any trading profits, and in many cases the underlyinginvestments are not transparent and are known only to the investment manager. The biggest double edgedsword characteristic of hedge funds is therefore that it has minimal government regulations and managers

have great flexibility. It is very important to investigate any hedge fund that you might be interested in, forthere is a great deal of fraud because of the lack of legal control and transparency.

To prevent fraud, we should do the following:

Read a fund's prospectus or offering memorandum and related materials. Make sure you understand the levelof risk involved in the fund's investment strategies and ensure that they are suitable to your personal investinggoals, time horizons, and risk tolerance. As with any investment, the higher the potential returns, the higherthe risks you must assume.

Understand how a fund's assets are valued. Funds of hedge funds and hedge funds may invest in highlyilliquid securities that may be difficult to value. Moreover, many hedge funds give themselves significantdiscretion in valuing securities. You should understand a fund's valuation process and know the extent towhich a fund's securities are valued by independent sources.

Ask questions about fees. Fees impact your return on investment. Hedge funds typically charge an assetmanagement fee of 1-2% of assets, plus a performance fee of 20% of a hedge fund's profits. A performancefee could motivate a hedge fund manager to take greater risks in the hope of generating a larger return.Funds of hedge funds typically charge a fee for managing your assets, and some may also include aperformance fee based on profits. These fees are charged in addition to any fees paid to the underlying hedgefunds.

Understand any limitations on your right to redeem your shares. Hedge funds typically limit opportunities toredeem, or cash in, your shares (e.g., to 4 times a year), and often impose a lock-up period of one year ormore, during which you cannot cash in your shares.

Research the backgrounds of hedge fund managers. Know with whom you are investing. Make sure hedgefund managers are qualified to manage your money, and find out whether they have a disciplinary historywithin the securities industry. You can get this information (and more) by reviewing the advisers Form ADV.You can search for and view a firms Form ADV using the SECs Investment Adviser Public Disclosure (IAPD)

website. You also can get copies of Form ADV for individual advisers and firms from the investment adviser,the SECs Public Reference Room, or (for advisers with less than $25 million in assets under management)the state securities regulator where the adviser's principal place of business is located. If you dont find theinvestment adviser firm in the SECs IAPD database, be sure to call your state securities regulator or searchthe NASD's BrokerCheck database for any information they may have.

REDEMPTIONS AND LOCKUP PERIODSRedemptions are restricted by lock-up periods and required notices well before the redemption. Hedge fundsrestrict redemptions so that the fund manager is not forced to sell or close out positions when it would bedetrimental simply because investors are panicking. Sometimes the hedge funds can borrow the money topay for redemptions, but if there are too many at one time, then the fund will have less collateral for loans, andtherefore, will need to close out positions to generate the cash for redemptions. Sometimes, the banks wontaccept the collateral as is occurring now (Aug, 2007) with assets based on subprime mortgages. Becausefunds of hedge funds invest in these hedge funds, they, too, are required to give adequate notice of


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redemptions, and so they must require similar notices from their own customers. In most cases, however,funds of hedge funds allow monthly or quarterly redemptions.

Hedge funds typically have an initial 1- to 5-year lockup period during which the investor cannot redeem anyshares, although most funds have a lockup period of less than 3 years. Only the best performing hedge fundscan demand the longer lockup periods. Some hedge funds have a lock-up period of 2 years or longer so that

the managers can avoid registering with the SEC. A new SEC rulein force since February, 2006requiresthat all managers of hedge funds with a lock-up period of less 2 years to register as investment advisers.

Longer lockups benefit the hedge fund because it offers greater stability, and a guaranteed cash flowgenerated by the asset management fee, which allows the funds to attract top managers by offering betterpay. Longer lockups also allow a fund to invest in illiquid assets that may take time to generate good returns,such as investments in private equity.

REGULATION OF HEDGE FUNDS MARKET & ASSOCIATED ISSUESThe assets under management of the hedge funds are growing on a double digit rate and it is estimated thatworldwide the Hedge Fund industry is nearly $3 trillion dollars. This has created a lot of troubles for financialregulators as Hedge funds are able to influence markets in a more radical manner than they would do so

when they first started. Some argue that hedge funds should be regulated due to their potentially highsystemic risk. A hedge fund would have been subject to the same rules and regulations of mutual funds had itnot been for the exclusion of retail investors in favour of whole sale or accredited investors who have anannual income of over $200,000 or a net-worth of $1 million and the limit on total number of investors in thefund.

Hedge Funds bring liquidity to capital markets, and also make capital markets more efficient because theyscour the financial landscape for inefficiencies, and then use expertise to structure the optimal investment totake advantage of the opportunity. They have been instrumental in transforming the investment landscape,making it much broader than equities, bonds and property. Hedge funds have acted as a beachhead in newinvestment strategies, including middle market lending, asset-backed lending, credit derivatives, reinsurance,and carbon credits.

There were many scandals and liquidations across a wide swath of the hedge fund industry during the recentsubprime crisis in the developed economies. The EU issued a draft directive on Alternative Investment FundManagers, with a number of provisions that require managers to regularly disclose their risk-managementstrategies, their positions and returns, audit arrangements and other such information to the regulator. Thissuggestion has been the cause of a huge uproar amongst the hedge fund community, especially in the UK.On the one hand, the average, non-fraudulent hedge fund was more the victim than the culprit of the recentfinancial crisis. Its also the case that bad news, such as news of frauds, is more likely to be disclosed duringmarket downturns. Moreover, many hedge funds business models are based on the premise of providingliquidity to markets and garnering returns by harvesting liquidity premiums. This is an important public serviceand one that needs to be considered carefully when evaluating the consequences of imposing harshregulations on them. Another important public service that they provide is that hedge funds help to makefinancial markets more efficient by disciplining prices towards their fundamental values.

On the other hand, there are some important issues, including a number of curious facts about hedge funds.

First, a growing body of academic research shows that hedge funds dont really provide absolute returns asthey often promise, since their returns are often highly correlated with movements in the market, likely takingon a good amount of systematic risk. Second, operational risk is an important component of the risk ofinvesting in hedge funds. This form of risk can be mitigated (and predicted) by acquiring simple informationsuch as whether the hedge fund has an independent and well-respected auditor; whether the fund or fundmanager has a history of legal or regulatory problems; whether there were criminal charges against the fundmanager in the past and so on. Third, under the current regulatory regime, there is no requirement on hedgefunds to disclose some of these basic facts to outside investors under existing legal provisions in mostjurisdictions. Finally, since hedge funds arent required to report their performance to the regulator, they haveevery incentive to stop self-reporting to data providers and outside investors if they anticipate problems. Thismeans that predicting the probability of a hedge fund collapse using reported hedge fund returns is virtuallyimpossible, since any negative signals are not likely to be made available by fund managers. Mandatoryreports from fund managers are needed to help predict these outcomes.


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Regulatory Scenario in India2007 was a watershed year for India. A preliminary assessment of capital inflows into India show more thanUS$16bn of foreign investment for the year. This marked the first time in recent history that more foreigninvestment flowed into India than into China, making India the number one destination for foreign directinvestment. There are three basic routes through which foreign funds may structure investments into India: (i)foreign direct investments (FDI); (ii) foreign institutional investor (FII) investments; and (iii) foreign venture

capital investor (FVCI) investments.

To invest via the FII or FVCI routes, the respective status must be obtained by applying with the various Indianregulatory agencies and meeting the requisite criteria. To effectively operate as a Hedge Fund, the fund mustbe able to freely trade the securities it holds without significant regulatory hassle. This makes obtaining FIIqualification a near necessity for direct investment into the Indian public markets. The problem was that, priorto the revisions that came out in late 2007, SEBI essentially barred foreign hedge funds from directlyparticipating in the Indian public equity markets. In fact, it would not grant FII status to any applicant thatdescribed itself as a hedge fund. This policy forced hedge funds who wanted to participate in the Indian publicmarkets to use Participatory Notes (P notes) derivative instruments issued by investment banks who hadthemselves registered as FIIs and had then bought and sold the underlying Indian securities on the openmarket, while concurrently issuing P notes based on those underlying securities to hedge funds.

This secondary market for P notes came to represent a significant part of the Indian public markets andaccounted for a large percentage of the capital inflow in the year. However, because these inflows werebased on derivative instruments, the Indian government had little insight into who these underlying investorswere visibility into issues such as the number of investors investing in a particular security, their risk profiles,their use of leverage (which may expose the Indian market to foreign credit risk) or any other details, wasessentially nil. The revisions to the FII regulations were meant to address these shortcomings and theregulators took a carrot and stick approach to encouraging the market to move in particular direction.

First, FIIs can no longer issue any offshore derivative instruments with underlying derivatives and any suchinstruments must be wound up over the next 18 months. Second, there was a cap imposed on the volume ofoffshore derivatives that FIIs can issue the notional value of the offshore derivatives outstanding could notbe more than 40 percent of the FIIs total assets under custody in India. Lastly, the purchasers of thesederivative instruments had to be regulated entities. Although, there are some types of funds that are exemptfrom being regulated, such as pension funds, foundations, endowments, university funds and charitable trustsor societies, the problematic consequence of these changes is that, because many foreign hedge funds andtheir managers are not required to be registered with the respective securities authority in their jurisdiction offormation (although they are subject to some level of regulation), a significant portion of hedge funds are noteligible to participate in the Indian public markets either directly or indirectly through P notes.

SEBI stated that there will be additional changes and clarifications made to the FII regulations with the mainobjectives of (i) permitting access to the Indian markets to foreign investors; (ii) increasing the universe ofinvestment products; and (iii) analysing the cost competitiveness of the Indian market compared to other FDIdestinations. From a policy perspective, these revisions were the first steps to SEBI taking a more activistapproach to the regulation of foreign hedge funds (and foreign investors in general) investing in India.

The US Market

The Securities and Exchange Commission (SEC) has outlined its proposed framework for regulating hedgefund managers, implementing the provisions of the Dodd-Frank Act on financial reform. Hedge fund managerswith over $150 million in assets will have to register with the SEC and provide regulators with moreinformation about their businesses, including details of the type investors of their funds.Hedge funds will also have to provide the SEC with names of their service providers, such as prime brokers,auditors, administrators and outside marketers. The SEC also wants hedge funds to disclose businesspractices that may present significant conflicts of interest, such as the use of affiliated brokers, soft dollararrangements and compensation for client referrals. The SEC registration requirement becomes effective onJuly 21, 2011.

The EUThe main regulatory component of the proposed legislation is an obligation for EU-based managers of so-called 'alternative investment funds' to register and disclose their activities, in order to improve supervision


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and avoid systemic risks. The obligations are not applied to the funds themselves, but only to their managerssince it is the manager who is responsible for all key decisions.

GLOBAL TRENDS IN HEDGE FUNDSHedge funds have been with us since 1949, but their popularity and population have grown dramatically overthe past decade. By 1995, assets under management had grown to $250 billion. A few notable failures in thenext few years threatened a potential mass exodus, but the turn of the century witnessed unprecedentedgrowth as investors sought better returns for their investment dollar. The industry is concluding a period ofconsolidation in 2010 brought about by the downturn in global business activity.

The hedge fund industry has grown in popularity over the past decade as investors, both the wealthy and thetraditional retail consumer, sought above-average returns from this alternative investment vehicle. The growthby any measure has been substantial, and despite some recent setbacks during the global recession, assetsunder management are estimated to be $1.5 trillion, spread amongst a high of 12,000 firms across the globein 2007, down to 8,400 firms today with an average portfolio size of nearly $180 million.

Year 2000 2005 2007 2008 2010

Hedge Fund Firms 2,200 10,000 12,000 10,000 8,400

Although consolidation has reduced its ranks, the industry still looks forward to healthy growth prospects inthe future, driven by strong performance in 2009 and broader access to the general public of investors. Netinflows have steadily increased, and sentiment is high for continued growth. The outlook for the balance of2010 and beyond follows the major trends that are presently causing a significant shift in the hedgefund industry.


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DATA ANALYSIS

We collected data for top performers in different hedge funds category (see exhibit 1-3) and find some results.

Fig 1: Compound annual return of top 5 performers in different category

Fig 2: Compound annual return of top performer having 1 year of lock in period in different category

Fig 3: Compound annual return of top performer in different category

Fig 4: Worst draw down of top performer hedge fund in various categories

Fig 5: Value of beta vs S&P500 of top performer in different category


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We can see in the figure 1 that fixed income Asset Backed and equity long/short have outperformed otherhedge funds in terms of annual return, whereas equity short biased Hedge funds are giving lowest annualreturn. This justifies the fact that in exercise companies prefer long biased funds over short biased.

This graph in figure 2 plots the compounded annual return (%) of hedge funds having lock in period of 1 yearunder different investment strategies. Individual hedge funds are selected from a pool of top 5 funds in eachcategory, having lock-in period of 365 days. This graph also displays the more or less similar results of graph1. We can see that for a hedge fund if the lock-in period is 365 days then equity-long based hedge fundsperform better than other.

From the graph 3 we found that equity long only and equity long/short have the worst drawdown amongst allcategories , but as their annual return is also in high range states the fact that in short run these hedge fundsmay seems risky but in long run they gives highest gain.

Considering the Beta of the top performing Hedge Funds of each category and comparing it to the S&P 500,being the most common proxy for the market as a whole, we observed that the Convertible Arbitrage, equitylong/short and equity long only categories of Hedge Funds have been performing at higher price volatility thanthe overall market. Whereas sub categories under Fixed - Income and equity short biased and market

neutral have very low value of beta which implies that hedge funds of these categories doesnt depend moreon market conditions.

HEDGE FUNDS AND PRIVATE EQUITYPrivate equity funds and hedge funds are both alternative asset classes that are continuously growing inimportance. Although they have different focuses, they share some characteristics.First of all, both have or allegedly have a significant impact on the economy as well as the financial systemthey operate in. Therefore, the question of a potential regulation of both asset classes arises. Due to the lackof sophisticated knowledge about the differences of these asset classes, market players fear that attempts toregulate hedge funds will adversely affect private equity funds. Besides the regulatory issue, there are severalother links between these two asset classes that have to be looked at. The relationship between those two

asset classes is therefore of general importance. The debate has been partly fuelled by the fact that bothtypes of funds are highly funded by institutional investors from abroad.


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Major differences between private equity funds and hedge funds

The major differences between private equity funds and hedge funds are both the time horizon of theinvestmentand the investment strategy.

Private equity funds are long-term oriented investors in portfolio companies. They are structured as closed-end-funds which bound their investors for around seven to nine years. Private equity funds mostly focus onprivate companies, in which they invest. Private equity funds usually aim at owning majority stakes. Hedge

funds on the contrary are short-term investors usually allowing their investors to retrieve their money on amonthly or quarterly basis, even though in some case the redemption period might be significantly longer. Forthis reason, hedge funds cannot exploit mispricing that tends to be dissolved only in the long run. This mightcause specific short term thinking in their investment strategies. From this it becomes clear why a hedge fundnormally would not buy a majority stake in a company that needs to be turned around, as such a strategynormally takes several years. This is why they might prefer to bet on exerting pressure on the management ofa publicly traded company with the goal to cause a short-term price reaction on the stock market.Bearing in mind the different time horizon it becomes obvious that hedge funds can unlike private equityfunds not set a strategic agenda in a portfolio company. On the contrary, they can only generate profits bymaking use of undervaluation that can be partially dissolved in a short-term. Additionally, it should be takeninto account that due to this short-term focus under some circumstances hedge funds might not be interestedin betting on a perceived undervaluation, whereas private equity funds might do so. This is always the case, ifit is agreed upon that undervaluation will only be rectified after a time and effort consuming change ofincumbent management and strategic redirection of a company. Although it is very important for the well-

being of a society that these kinds of companies will be taken over, hedge funds might refrain from doing soas the pay-off of such a strategy will accrue only in the long run. Hence, private equity funds can create valuewhere hedge funds cannot because of their short-term approach.


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Similarities between the two asset classes

The two asset classes share several common characteristics. Some of these exist between the two assetclasses in general. Others are only valid between private equity and a certain subgroup of hedge funds. Thissub-group covers hedge funds whose investment strategy is comparable to that of private equity houses, i.e.acquiring stakes in companies and influencing corporate decisions. This may be true for the whole hedge fundor parts of the allocated capital.

Both asset classes address institutional investorsfor fundraising. In their effort to increase capital allocation inalternative asset classes with a focus on absolute returns, institutional investors mainly resort to hedge fundsand private equity funds, as these are not the only, but the major choice of alternative investments. For thisreason, private equity funds and hedge funds compete in the fundraising process. As a response to thispressure, some private equity funds (such as Texas Pacific Group) team up with hedge funds to jointlycompete for funds. Furthermore, some hedge-fund-of-funds also invest in private equity. Apart from that,


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some institutions offer hedge funds andprivate equity funds under one umbrella. Examples for this areFortress and Partners Group. These institutions may develop by means of internal growth, but they can alsobe created through a business combination of existing entities. In the US there have been mergers of hedgefunds and private equity funds.

Instead of always competing sometimes both entities work together. Hedge funds are an important buyer of

the junk bonds that private equity funds issue in order to finance the deal. On a positive note, this means thathedge funds facilitate the private equity business. However, discussions about the stability of the hedge fundindustry might therefore also endanger private equity deals. Finally, both fund types have some structuralcharacteristics in common. They are typically organized as limited partnerships. While the investors arelimited partners, managers (mostly represented by an entity advising the fund vehicle) are general partners.Compensation systems are also quite similar as they are charged on performance basis. Both types of fundsshow similar characteristics in their relationship towards investors, as they fulfil the definition of private funds.And they both have the problem of a low transparency of the underlying.

Convergence

The shift from their traditional business models is caused by hedge funds seeking new investment alternativesin illiquid assets and private equity firms seeking diversification through liquid investments. Hybrid investmentis the term for this lately developing structure in the private equity and hedge fund industry. A hybrid structureis characterized by both liquid and illiquid investments within the same fund. Hedge funds invest in companiesusually by making use of side pockets, resembling a private equity fund for each private equity investment. Asthe lines between private equity and hedge

Funds are blurring, convergence among these industries takes place. While there is still competition fortalented managers, investors and the best deals among the two, convergence is the new direction. Sidepockets and in-house hedge funds allow managers to work closer together and share their expertise in thedifferent fields. They also increase efficiencies due to a larger investor or capital base and due to cost savingsfor investors. The larger asset base opens more possibilities to generate returns and thus reduce risk throughbetter diversification. Furthermore, investors save on administrative costs and fees, as they would like toallocate their capital to both hedge- and private equity funds. The largest hedge funds as well as the bigprivate equity players have switched to hybrid structures, offering investors new investment opportunities in-house. However, fund managers and investors should be careful not to chase too few deals with too muchmoney.


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CONCLUSIONThe size of the hedge fund industry, relative to the markets in which the funds operate, is too small for hedge

funds alone to move the market. However, it is possible that they may move the market because otherinvestors follow their leadan effect referred to as herding. Although some hedge funds do gear internally,only a fifth of them have debt-to-asset ratios above 50 per cent, on a par with many industrial companies.Hedge funds can only play a limited role in the sense, they do not create conditions themselves, they onlycapitalize on the sometimes warped fundamentals of the markets.

On balance, it appears that the right level of regulation is to mandate that hedge funds disclose their positionsand returns to a regulatory body. Furthermore, prospective investors should legally be able to obtain accurateinformation about a funds characteristics and its managers background. Only allowing the regulator accessto position and return information sidesteps the concern that hedge funds have about their proprietaryinvestment strategies being disclosed to the public. And allowing investors to easily undertake due diligenceabout hedge fund managers might make outrageous frauds less likely. It is clear that if funds wishing toparticipate in the Indian markets will need to do so by qualifying as FIIs. For investment funds interested ininvesting in the Indian public markets, this forces them to either commit to going through the process of setting

up an FII qualified entity or forgo the Indian public market altogether. Considering how important India hasbecome as a destination for emerging market investment, SEBIs tactics could not have been morestrategically timed. The upshot of these new rules is that the Indian regulators do want foreign investmentfunds to invest in India, but they must be the right kind of foreign investors investors that are moretransparent and, considering the recent problems with the US credit markets, ones which will not expose theIndian markets to the credit problems facing other markets.

From the data analysis, we found that in recent past fixed income Asset Backed and equity long/short haveoutperformed other hedge funds in terms of annual return, whereas equity short biased Hedge funds aregiving lowest annual return. This justifies the fact that in exercise companies prefer long biased funds overshort biased. Although equity long only and equity long/short have the worst drawdown amongst all categories, but as their annual return is also in high range states the fact that in short run these hedge funds may seemsrisky but in long run they gives highest gain. Convertible Arbitrage, equity long/short and equity long onlycategories of Hedge Funds have been performing at higher price volatility than the overall market. Whereas

sub categories under Fixed - Income and equity short biased and market neutral have very low value of betawhich implies that hedge funds of these categories doesnt depend more on market conditions.

The major differences between private equity funds and hedge funds are both the time horizon of theinvestment and the investment strategy. In the past, the investment styles of hedge funds and private equityfunds were well defined and distinct. Today, that is no longer the case. Increased competition in traditionalhedge fund markets is causing some hedge fund advisers to pursue private equity investment opportunities.In particular, some hedge funds are lengthening the investor lock-up period beyond the two year period thatthe

Adopting Release used to define a private fund.Many experts are concerned that the recovery the hedgefund industry is currently experiencing will be stymied as regulatory compliance continues to unfold across theglobe. However, despite troubles in the last few years, the hedge fund industry continues to thrive as

investors continue to want higher-than-average returns.


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EXHIBITS

Exhibit 1 : Performance of top hedge funds in Convertible Arbitrage, Distressed securities and Event

driven categories.

Sr.No.

Category Hedge fund program Rank

lock upperiod

(indays)

totalreturn(in %)

compoundannualreturn(in %)

averagemonthlyreturn(in %)

worstdrawdow

n(in %)

betavs

S&P500

1ConvertibleArbitrage

Lucerne CapitalOffshore Fund, Ltd. 1

none198.02 15.48 1.44 -58.29 1.17


Rhine Alpha StarsFund Class C CHF 2

36579 10.99 1.06 -54.92 0.66

3

Convertible

Arbitrage

Cazenove UKDynamic Absolute

Return Fund A GBP 3

none

87.36 12.09 0.98 -11.96 0.18


Hamton EuropeanEquities Limited 4

none-19.95 -4.42 -0.11 -69.38 1.14


Aster-X PanoramaFund 5

180-7.02 -1.54 0.06 -54.1 0.8

6DistressedSecurities

JLP Credit OpportunityFund L.P. 1

365254.82 19.32 1.64 -51.71 0.85


Deltec RecoveryFund, L.P. 2

none39.83 3.49 0.46 -72.15 0.7

8

Distressed

Securities

CAI Distressed Debt

Opportunity Fund LLC 3365

34.81 4.2 0.4 -45.57 0.49


Wilfrid AubreyInternational Limited 4

365125.78 11.08 0.93 -38.99 0.46


PENN DistressedFund, L.P. 5

180308.59 17.63 1.48 -44.16 0.65

11 Event DrivenMarwyn Value InvestorsLP 3

730days

144.01% 20.65 1.78 -48.48% 0.65

12 Event DrivenLaGrange CapitalPartners, L.P. 2 none

146.04% 8.87 2.21 -95.41% 2.43

13 Event Driven

Altima Global Special

SituationsFund Ltd. Class A 4

365days 94.47% 10.92 0.92 -22.33% 0.36

14 Event DrivenFrontFour CapitalPartners L.P. 5 none 19.00% 4.54 0.52 -43.31% 0.55

15 Event Driven ECF Value Fund II, L.P. 1 none172.94

% 15.62 1.37 -43.34% 0.86
http://www.barclayhedge.com/cgi-bin/baid/rank_details.cgi?prog_id=25108757http://www.barclayhedge.com/cgi-bin/baid/rank_details.cgi?prog_id=25108757http://www.barclayhedge.com/cgi-bin/baid/rank_details.cgi?prog_id=25107095http://www.barclayhedge.com/cgi-bin/baid/rank_details.cgi?prog_id=25107095http://www.barclayhedge.com/cgi-bin/baid/rank_details.cgi?prog_id=25113733http://www.barclayhedge.com/cgi-bin/baid/rank_details.cgi?prog_id=25113733http://www.barclayhedge.com/cgi-bin/baid/rank_details.cgi?prog_id=25105833http://www.barclayhedge.com/cgi-bin/baid/rank_details.cgi?prog_id=25105833http://www.barclayhedge.com/cgi-bin/baid/rank_details.cgi?prog_id=25105403http://www.barclayhedge.com/cgi-bin/baid/rank_details.cgi?prog_id=25105403http://www.barclayhedge.com/cgi-bin/baid/rank_details.cgi?prog_id=25108757http://www.barclayhedge.com/cgi-bin/baid/rank_details.cgi?prog_id=25108757http://www.barclayhedge.com/cgi-bin/baid/rank_details.cgi?prog_id=25107095http://www.barclayhedge.com/cgi-bin/baid/rank_details.cgi?prog_id=25107095http://www.barclayhedge.com/cgi-bin/baid/rank_details.cgi?prog_id=25113733http://www.barclayhedge.com/cgi-bin/baid/rank_details.cgi?prog_id=25113733http://www.barclayhedge.com/cgi-bin/baid/rank_details.cgi?prog_id=25105833http://www.barclayhedge.com/cgi-bin/baid/rank_details.cgi?prog_id=25105833http://www.barclayhedge.com/cgi-bin/baid/rank_details.cgi?prog_id=25105403http://www.barclayhedge.com/cgi-bin/baid/rank_details.cgi?prog_id=25105403


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Exhibit 2 : Performance of top hedge funds in Equity category

Sr.No.

Category Hedge fund program Ranklock upperiod

(in days)

totalreturn(in %)



worstdrawdown

(in %)

betavsS&P

500

1Equity- Long

Biased

Passport SpecialOpportunities Fund,

L.P 11095

37.48% 13.58 1.59

-43.24

% 0.70

2Equity- Long

BiasedCarrelton Horizon

Fund, LP 2365

169.86% 31.92 2.78

-30.21

% 0.92

3Equity- Long

BiasedCross RiverPartners LP 3

365162.95% 11.80 1.21

-62.29

% 1.02

4Equity- Long

BiasedBrightline Capital

Partners, L.P. 4365

237.21% 25.15 2.12

-28.61

% 0.75

5Equity- Long

BiasedMarathon Partners

L.P 5365

769.10% 17.14 1.45

-34.46% 0.55

6 Equity-Long Only

Dynamic PowerHedge

Fund (F - Series) 1none

1096.48% 33.90 3.20

-79.42

% 1.50

7 Equity-Long OnlyJ. Zechner AssociatesSpecial Equity Fund 2

none336.07% 14.80 1.53

-61.01

% 1.40

8 Equity-Long OnlyFront Street Growth

Fund 3none

332.36% 14.00 1.44

-62.60

% 0.80

9 Equity-Long Only

Select Contrarian

ValuePartners L.P. 4 365 657.55% 29.49 2.54

-

56.03% 1.22

10 Equity-Long Only

Front Street SpecialOpportunities

Canadian Fund 5none

949.45% 23.43 2.11

-56.61

% 0.66

11 Equity-Long/ShortKinetics Institutional

Partners L.P 1365

23.98% 3.92 71.00

-74.74

% 1.63

12 Equity-Long/ShortBTR Strategic Growth

Fund 2none

384.95% 146.50 8.28

-11.53

% 1.00

13 Equity-Long/Short SYW L.P. 3365

533.97% 54.42 4.68

-44.36

%-

0.13

14 Equity-Long/ShortSprott Offshore Fund

Ltd. USD 4365

592.82% 24.24 2.06

-39.16

%-

0.09

15 Equity-Long/ShortSenvest IsraelPartners, L.P. 5

730492.48% 26.11 2.37

-66.82

% 1.61

16Equity Short

BiasedConnective Capital II

QP, L.P. 3 none 17.25% 4.14 0.66

-47.83

%-

0.97

17Equity Short

Biased Waterloo Partners, L.P 2 90 days 40.76% 3.18 0.32

-21.49

%-

0.47

18Equity Short

BiasedAnson Investments

Master Fund LP 1 365 days 62.08% 15.18 1.22-

7.05%-

0.01


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19Equity Short

BiasedIsland Drive Partners

L.P. 5 none -33.03% -2.34 -0.16

-60.69

%-

0.48

20Equity Short

Biased Shoreline Fund I, L.P. 4 none 11.29% 1.79 0.34

-45.36

%-

1.15

21Equity Market

Neutral

QIC Asia PacificMarketNeutral Fund 4 - 7.60% 5.30 0.46

-10.08% 0.26

22Equity Market

Neutral Aphilion SIF 1 none 35.98% 13.08 1.19

-24.05

%-

0.01

23Equity Market

NeutralPyramis Global Market

Neutral Ltd. 3 365 days 14.28% 5.30 0.4710.14

% -0.1

24Equity MarketNeutral

BGI Eos Limited (B -Shares) 2 none 30.95% 8.42 0.73

-14.33

%-

0.02

25

Equity Market

Neutral

Pergamon Partners,

L.P. 5 365 days 5.36% 0.85 0.10

-24.31

% -0.1

Exhibit 3 : Performance of top hedge funds in Fixed Income category.

Sr.No.

Category Hedge fund programRan

k

lock upperiod

(in days)

totalreturn(in %)



worstdrawdown

(in %)

betavs

S&P500

1Fixed Income Arbitrage

Barnegat Fund LimitedClass B 1 none 401.43% 17.65 1.58

-55.86

% 0.39


Raven Rock Credit FundLP 5 none 30.03% 23.37 1.78

-3.09% 0.23


Concordia G-10 FixedIncomeRelative Value Fund 3 none 126.71% 12.72 1.09

-20.26

% 0.04


Pamplona CreditOpportunitiesFund Class A EUR 4 none 51.35% 24.13 1.84

-2.39% 0.19


EMF Fixed Income FundLtd.(Class II Series AAShares) 2 none 283.02% 15.39 1.35

-22.46

% 0.07

6Fixed Income Asset Backed

Alegra ABS I (Euro)Fund 5 none 10.93% 1.63 0.53

-84.24% 0.82


CCA Mortgage/CreditOpportunity Fund LLC 3 365 days 76.20% 25.43 1.93

-4.44% 0.03

8Fixed Income Asset Backed Toro Capital I 1 none 231.41% 122.28 6.96 N/A 0.17

9Fixed Income Asset Backed STS Partners Fund 2 none 110.78% 33.46 2.45

-1.50% 0.13


Good Hill OverseasFund II Ltd. 4 none 67.75% 30.98 2.32

-4.23% 0.15
http://www.barclayhedge.com/research/rankings/hf/equity_market_neutral.htmlhttp://www.barclayhedge.com/research/rankings/hf/equity_market_neutral.htmlhttp://www.barclayhedge.com/research/rankings/hf/equity_market_neutral.htmlhttp://www.barclayhedge.com/research/rankings/hf/equity_market_neutral.htmlhttp://www.barclayhedge.com/research/rankings/hf/equity_market_neutral.htmlhttp://www.barclayhedge.com/research/rankings/hf/equity_market_neutral.htmlhttp://www.barclayhedge.com/research/rankings/hf/equity_market_neutral.htmlhttp://www.barclayhedge.com/research/rankings/hf/equity_market_neutral.htmlhttp://www.barclayhedge.com/research/rankings/hf/equity_market_neutral.htmlhttp://www.barclayhedge.com/research/rankings/hf/equity_market_neutral.htmlhttp://www.barclayhedge.com/research/rankings/hf/equity_market_neutral.htmlhttp://www.barclayhedge.com/research/rankings/hf/equity_market_neutral.htmlhttp://www.barclayhedge.com/research/rankings/hf/equity_market_neutral.htmlhttp://www.barclayhedge.com/research/rankings/hf/equity_market_neutral.htmlhttp://www.barclayhedge.com/research/rankings/hf/equity_market_neutral.htmlhttp://www.barclayhedge.com/research/rankings/hf/equity_market_neutral.htmlhttp://www.barclayhedge.com/research/rankings/hf/equity_market_neutral.htmlhttp://www.barclayhedge.com/research/rankings/hf/equity_market_neutral.htmlhttp://www.barclayhedge.com/research/rankings/hf/equity_market_neutral.htmlhttp://www.barclayhedge.com/research/rankings/hf/equity_market_neutral.html


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11

Fixed Income -ConvertibleBonds

GAM Euro Special BondCHF Open 1 None 204.79% 5.13 0.48

-54.48

% 0.44

12

Fixed Income -ConvertibleBonds BCM Convertible Fund 2 None 0.97% 0.25 0.14

-38.84

% 0.66

13


Oyster GlobalConvertibles EUR 3 None 28.68% 16.33 1.30

-5.90% 0.39

14


NS Convertible andCreditOpportunities FundClass A 4 - 14.77% 10.88 0.87

-3.24% 0.21

15


Sage Strategic IncomeL.P. 5 None 283.22% 8.57 0.73

-29.68

% 0.47

16Fixed Income -Diversified

Brevan Howard CreditCatalysts Fund LP (A -USD) 1 - 27.35% 21.34 1.64

-1.46% 0.09


Obsidian (Offshore)Fund 2 365 410.23% 11.96 0.98

-20.93% 0.13


Thames River DollarGlobalBond Fund USD (Acc) 3 None 29.37% 4.44 0.38

-4.92%

-0.04


Kayne AndersonInfrastructureIncome Fund 4 None 11.49% 12.60 1.01

-2.63% 0.26


CFS Total Return Fund,L.P. 5 None 18.26% 6.94 0.58

-10.60

% 0.18

21Fixed Income High Yield

Simran Pre Event Driven

Activist OpportunityFund 1 None 55.81% 17.50 1.50

-28.87

% 0.54


Battery Park High YieldOpportunity Fund, L.P. 2 None 105.94% 7.97 0.70

-46.22

% 0.43


Verity InvestmentPartners, L.P. 3 365 148.32% 9.27 0.78

-27.61

% 0.29


Horizon MultiDisciplinaryOffshore Fund Ltd. 4 365 16.14% 5.42 0.63

-38.92

% 0.80


PENN Core High YieldBondFund, L.P. 5 180 91.21% 8.62 0.72

-21.60

% 0.35

31

Fixed Income MortgageBacked

Structured ServicingHoldings, L.P. 1 None

2483.90% 28.83 2.22

-30.43

% 0.08

32


SPM DirectionalMortgagePrepay Fund 2 730 104.10% 29.62 2.59

-41.58

% 0.23

33


Midway Market NeutralFund 3 None 513.72% 21.04 1.65

-24.93

% 0.15

34

Fixed Income MortgageBacked SPM Opportunity Fund 4 365 178.87% 29.93 2.37

-33.18

% 0.31

35 Fixed Income Mortgage

Metacapital MortgageOpportunities Fund

5 None 257.86% 72.70 4.71 -4.79%

0.07


25/26

Backed

REFERENCES1. Alt Assets (2004): A new strategy for venture investors: Hedge, 14/06/2004


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2. Collins, Michael (2004): Creeping Regulation of private equity fund managers, AltAssets as3. of 27/07/2004, www.altassets.com/knowledgebank/learningcurve/2004/nz5251.php.

4. Briefel, Alan/Mariathasan, Joseph (2005): Hedge Funds and private equity: conflict or convergence?5. Global Pensions, April 2005, p.22.6. Borello, Isabelle/Bader, Hanspeter (2004): Hedge Funds: A threat to Private equity?

7. www.altassets.com/features/arc/2004/nz4815.php

8. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=912964

9. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1109100

10.http://www.euractiv.com/en/financial-services/mccreevy-spares-hedge-funds-tight-regulation/article-

181867

11.http://www.hedgefundsreview.com/hedge-funds-review/news/1899488/sec-proposes-hedge-fund-

registration-rules

12.http://www.hedgefund-index.com/Legal%20Framework%20for%20Hedge%20Fund%20Regulation.pdf

13.http://www.hedgefundsindia.com/blog/_archives/2008/4/8/3626483.html

14.http://web.fc.edu/econfin/text/Hedge%20Funds%20Project.pdf

15.http://www.barclayhedge.com/research/educational-articles/

16.http://www.barclayhedge.com/research/educational-articles/hedge-fund-strategy-definition/hedge-

fund-strategy-distressed-securities.html

17.www.altassets.com/casefor/sectors/2004/nz5008.php
http://www.altassets.com/features/arc/2004/nz4815.phphttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=912964http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1109100http://www.euractiv.com/en/financial-services/mccreevy-spares-hedge-funds-tight-regulation/article-181867http://www.euractiv.com/en/financial-services/mccreevy-spares-hedge-funds-tight-regulation/article-181867http://www.hedgefundsreview.com/hedge-funds-review/news/1899488/sec-proposes-hedge-fund-registration-ruleshttp://www.hedgefundsreview.com/hedge-funds-review/news/1899488/sec-proposes-hedge-fund-registration-ruleshttp://www.hedgefund-index.com/Legal%20Framework%20for%20Hedge%20Fund%20Regulation.pdfhttp://www.hedgefund-index.com/Legal%20Framework%20for%20Hedge%20Fund%20Regulation.pdfhttp://www.hedgefundsindia.com/blog/_archives/2008/4/8/3626483.htmlhttp://www.hedgefundsindia.com/blog/_archives/2008/4/8/3626483.htmlhttp://web.fc.edu/econfin/text/Hedge%20Funds%20Project.pdfhttp://web.fc.edu/econfin/text/Hedge%20Funds%20Project.pdfhttp://www.barclayhedge.com/research/educational-articles/http://www.barclayhedge.com/research/educational-articles/http://www.barclayhedge.com/research/educational-articles/hedge-fund-strategy-definition/hedge-fund-strategy-distressed-securities.htmlhttp://www.barclayhedge.com/research/educational-articles/hedge-fund-strategy-definition/hedge-fund-strategy-distressed-securities.htmlhttp://www.altassets.com/casefor/sectors/2004/nz5008.phphttp://www.altassets.com/features/arc/2004/nz4815.phphttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=912964http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1109100http://www.euractiv.com/en/financial-services/mccreevy-spares-hedge-funds-tight-regulation/article-181867http://www.euractiv.com/en/financial-services/mccreevy-spares-hedge-funds-tight-regulation/article-181867http://www.hedgefundsreview.com/hedge-funds-review/news/1899488/sec-proposes-hedge-fund-registration-ruleshttp://www.hedgefundsreview.com/hedge-funds-review/news/1899488/sec-proposes-hedge-fund-registration-ruleshttp://www.hedgefund-index.com/Legal%20Framework%20for%20Hedge%20Fund%20Regulation.pdfhttp://www.hedgefundsindia.com/blog/_archives/2008/4/8/3626483.htmlhttp://web.fc.edu/econfin/text/Hedge%20Funds%20Project.pdfhttp://www.barclayhedge.com/research/educational-articles/http://www.barclayhedge.com/research/educational-articles/hedge-fund-strategy-definition/hedge-fund-strategy-distressed-securities.htmlhttp://www.barclayhedge.com/research/educational-articles/hedge-fund-strategy-definition/hedge-fund-strategy-distressed-securities.htmlhttp://www.altassets.com/casefor/sectors/2004/nz5008.php

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