A hedge fund is an investment fund that pools capital from accredited individuals or institutional investors and invests in a variety of assets, often with complex portfolio-construction and risk-management techniques.
It is administered by a professional investment management firm, and often structured as a limited partnership, limited liability company, or similar vehicle. Hedge funds are generally distinct from mutual funds, as their use of leverage is not capped by regulators, and distinct from private equity funds, as the majority of hedge funds invest in relatively liquid assets.
The term “hedge fund” originated from the paired long and short positions that the first of these funds used to hedgemarket risk. Over time, the types and nature of the hedging concepts expanded, as did the different types of investment vehicles. Today, hedge funds engage in a diverse range of markets and strategies and employ a wide variety of financial instruments and risk management techniques. ( Source: Wikipedia)
Some of the most famous Hedge Funds are:
- Renaissance Technologies (AUM 84 bln): according to the fund website “Renaissance Technologies is a quantitative investment management company trading in global financial markets, dedicated to producing exceptional returns for its investors by strictly adhering to mathematical and statistical methods”. The company was founded in 1982 by James Simons, an award-winning mathematician and former Cold War code breaker.
- Two Sigma (AUM 51 bln): the fund states that “we’re not your typical investment manager. We follow principles of technology and innovation as much as principles of investment management. Fields like machine learning and distributed computing guide us. Since 2001, we’ve searched for ways that these kinds of technologies can make us better at what we do. We never stop researching and developing”.
- the fund investment philosophy states that ” contrary to widespread market views, we believe that significant value lies hidden in large, complex companies that are difficult for the market (and sometimes even insiders) to understand. In many cases this can be unlocked through the sort of commitment and proactive involvement one more usually finds in private equity”.
- Citadel Investment Group (AUM 30 bln): the company declared objective is to analyze global markets with discipline and focus, and employ a diverse range of strategies in an effort to deliver consistent investment returns to our capital partners.
- Point72 (AUM 12.4 bln): Steven Cohen’s hedge fund invests in multiple asset classes and strategies worldwide. They always pursue innovation in their investing style and products as the global markets evolve.
- Millennium Management (AUM 5.2 bln) : theyemploy a global multi-strategy investment approach, opportunistically engaging in a broad array of trading and investing strategies across a wide group of diversified managers. Their trading teams to independently pursue unique investment strategies within one centrally-driven risk and operational framework.
- Third Point (AUM 17.5 bln): Third Point employs an event-driven, value-oriented investment style. The Firm seeks to identify situations where we anticipate a catalyst will unlock value. Third Point focus on delivering exceptional risk adjusted returns with limited market exposure.