Hedge Funds for the Advanced Financial Professional

Agenda Program
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Prague, NH Hotel Prague
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The Hedge Fund Industry and Its Players
New Regulation and Its Possible Impacts
Building and Managing Hedge Funds and “Clones”
Market Neutral, Relative Value and Directional Investing
Fund-of-Funds and Investable Indexes
Implementing Hedge Fund Replicating Strategies
Risk-Return Profiling and Performance Measurement
Managing a Portfolio of Hedge Funds and Replicating Strategies
Measuring and Managing “Tail” Risks
The past 1-2 years have been trying times for hedge funds. The turmoil following the collapse of Lehman in the autumn of 2008 led to a dry-up of liquidity in almost all parts of the financial system, which made it very difficult for hedge funds to use investment tools such as leverage and short-selling. However, market conditions are now improving, and the best funds are adapting to the new post-crisis reality of simpler and more low-cost strategies. Many investors have also been inspired by the modus operandi of hedge funds and are now increasingly implementing replicating strategies and "clone" funds.

The purpose of this seminar is to give you an in-depth understanding of hedge funds, of the risk and return characteristics of their investment strategies, and of techniques for constructing and managing portfolios of hedge fund investments and replicating strategies.

We start with a look at the hedge fund industry and its major players and discuss recent market developments, including the regulatory changes that are on their way. We then take a closer look at "institutional" aspects of running such funds. We explain how a hedge fund is set up and look at the role of the "prime brokers" as providers of services such as financing, securities lending, clearing and settlement of transactions etc. We also take a closer look at the toolkit of the hedge fund manager, including the use of short-selling and leverage, and we discuss the challenges of using these tools during a liquidity crisis. We also explain and demonstrate how these tools can be used directly by investors in "hedge fund replicating strategies".

We then explore in more detail the investment strategies of the different types of hedge funds. We start with market neutral strategies such as "pairs trading" and then move over "convertible arbitrage", "fixed income arbitrage" and "event-driven" towards the more directional types of funds such as "global macro", "dedicated short", "emerging markets" and "CTAs". In each case we carefully explain the performance profile and the special risks of the strategy and how the strategies can be implemented as "replicating" strategies. We illustrate using practical case studies and computer simulations.

Further, we explain how "funds-of-hedge-funds" operate and discuss the advantages and disadvantages of investing through such funds. We also explain how hedge fund indexes are constructed and how to invest in so-called "investable indexes" as an alternative to investing through funds of funds.

Finally, we give a thorough explanation of how hedge fund investments and replicating strategies can be managed in the context of a portfolio. We present and demonstrate traditional and alternative optimization techniques for constructing optimal portfolios and explain how stress tests and "extreme VaR" analysis can be performed to assess the "tail" and liquidity risks of hedge fund investing.

Program of the seminar: Hedge Funds for the Advanced Financial Professional

The seminar timetable follows Central European Time (CET).

09.00 - 09.15 Welcome and Introduction

09.15 - 12.00 The Hedge Fund Industry and Its Players

  • Hedge Funds and the Financial Crisis
  • Case Studies: Recent Hedge Fund Failures
  • The Move Towards Stronger Regulation of Hedge Funds
  • Focus on Hedge Fund Risks
  • Recent Trends: The Evolution of Hedge Fund Clones and Hedge Fund Replicating Strategies

Building and Managing a Hedge Fund

  • Setting Up the Fund
  • Regulatory and Tax Issues
  • The Hedge Fund Managers Toolkit
    • Short-selling, Leverage, Derivatives
  • Prime Brokers � How they Operate Post-Lehman
  • Possible Conflicts of Interest in Managing Hedge Funds
  • Setting Up a Replicating Fund
  • Real Life Case Studies

12.00 - 13.00 Lunch

13.00 - 16.30 Equity Strategies

  • Equity Market Neutral Strategies
    • Pairs trading
    • Fundamental arbitrage
    • Statistical arbitrage
    • �Double Alpha�
  • Opportunistic Long-Short Strategies
  • Dedicated Short Bias
  • Using Futures in Market Neutral Investing
    • Porting Alpha
    • Equitizing a market neutral strategy
  • Convertible Arbitrage
    • Delta-hedging the equity exposure
    • Hedging the credit risk
  • Case Studies
  • Exercises

09.00 - 09.15 Brief recap

09.15 - 12.00 Relative Value and Directional Investing

  • Fixed Income Arbitrage
    • On-the run/Off-the-run arbitrage
    • Yield curve arbitrage
    • Mortgage arbitrage
    • High yield/CBO arbitrage
  • Duration and Multi-Factor Bets
  • Global Macro Strategies
  • Futures Funds/CTA�s
  • Event-Driven Strategies
    • Merger arbitrage and distressed debt investing
  • Capital Structure Arbitrage
    • Arbitraging between debt and equity investments
  • Emerging Markets
  • Implementing Relative Value Fund Replicating Strategies
  • Exercises

12.00 - 13.00 Lunch

13.00 - 16.00 Multi-Strategy Funds, Fund-of-Funds and Investable Indexes

  • Advantages of Investing through Multi-Strategy Funds
  • Fund-of-Funds and the Way they Operate
  • Fund-of-Funds � the Ignominy of Madoff

Managing a Portfolio of Hedge Funds

  • Risk-Return Profiling of Hedge Fund Investments
  • The Portfolio Managers Checklist for Investing in Hedge Funds
  • Building a Portfolio of Hedge Fund Replicating Strategies
  • Constructing the Optimal Portfolio
  • Measuring and Managing �Tail� Risks and Other Risk
  • Performance Measurement
    • What is the relevant measure of performance?
    • How is tail risk incorporated?
  • Exercises

Evaluation and Termination of the Seminar

Training catalogue in PDF
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