Essay Example on Hedge Funds: Performance, Risks and Regulations

Introduction

Generally, a hedge fund is non-restricted private investment drives that are related by persons of high standards as well as institutions. The explanation of hedge funds concerning a regulatory point of view is very significant in expressing their differences from institutions of investment. The article also shows the overall performance of the hedge investment, where it was to realize as the best performer in contrast to the previous risks related to the traditions. Lack of enough collected data on Hedge funds has made the performances of the investment unappealing.

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Moreover, it was uneasy about illustrating the interpersonal hedge fund about the standardized multifactor risk structure. It shows that it is not easy to measure all the risks related to hedge fund investment. Conclusively, the article suggests that managerial structure with relevant skills to present the compensation process.

The implication of the Money Managers

Hedge fund management is subjected to the general regulatory authorities in case of any malfunctions, as described by clause 10(B) of the Securities Act 1934. In terms of money management, investors are allowed to access all the possible risks related to their invested money. They are assured of their membership through a binding document referable in case there a misunderstanding in the future. Moreover, access to the funds from this investment is to get subjected to tight rules before the issuance of the said fund. Any stock that is above 5 percent is clear to report to the SEC before being issued to the target company. They are all regulated by the US treasury laws.

Criticism

One of the necessary accruals from the hedge fund investment is the issue of mutual fund regulation regarding clause 3(c)1. Here, only a section of individuals is allowed to play any role within the investment circle, the rich. In reflecting this, some persons or companies (with less than $ 5 million) with potential interest to be part of the team are not barred off. Either the strategic investment variance creates a hard standard for the explanation of the whole process and how they are subject to the legal formalities. The investors in this sector are not bond to display their overall performances to the public, thus aligning themselves only to the members of the investment. All these should make subjectively reliable and accessible to very potential individuals irrespective of their financial status. Moreover, there is a need for government intervention towards the transparency of the hedge fund.

Market Timing and Roulette Wheels

Summary

As evident from various literature reviews, market timing brings to the maximal return through the focus of marketing trends, thus helping them to decide to play a role or not. Roulette Wheels is using in the measurement of whatever might have transpired and its positivity in the investment process. Roulette Wheel measurement is always a standard rank return that is realized through an exact percentage that is required to outdo the strategic plans of market timing. As an instance, when investors are subjected to market timing per month, they would choose from either T-bills or large-cap stocks. Either to maintain the monthly market timing, the investors may consider the accurate prediction of almost 66% to outdo other reliable sources. The period of 1995 to 1999, the purchase and withhold of robust stocks and capitals might have surpassed a wholesome of 99.8% from over a million quarter changing sequences from large stocks to US T-bills.

The implication of the Money Managers

In terms of management of funds, Roulette Wheel provides a measurable process where an individual can relate the benefits of such strategies like buying and hold the mechanism concerning the cost of a transaction. The market timing allows for the individual or company to translate all the benefits and losses as defined by the previous month's consideration. Either, it creates a double choice investment path from monthly to annually. From the trends and sequences of the way, an investor picks the one with the highest rank, either stocks or T-bills. The interval switch of the assets makes the investor realize which path presents the best result and the other showing a weaker one.

Criticism

The whole process is ether significant or negative, depending on the path chosen by the investor. The measurement does not provide a way forward, especially during peak days, when market timing is unreliable. Specific tracks like quarterly are not significant to all assets or stock as it provides a weak and hard trend for the investors to follow. This implies that it may not be entirely reliable in considering the awkward moment in the market.

Fundamental Indexation

Summary

The article has generated a generalized fundamental based on the market portfolio as defined by the selective weight and size of the company. The measurement includes revenue collection, dividend, and others. The outcome of the marketing portfolio outweighed the S & P 500 with 1.97 pps in respect to the 43 years of test workout. It yielded a tremendous performance within the timeframe of the test with low interest realized. The underlying indices presented materialistic variance as compared to the standard cap weight indices. The findings, as presented in this article, show that historical presentation may recur in future investments. The "next 2000" is one of the considerable zones that viably relayed a positive performance, as explained in the article.

The implication of the Money Management

To control and make sure that the money flow in the investment, the management provides an agreeable philosophy that doesn't rely on inefficient delivery. All are geared toward success and income generation, thus assuming any form of the price is null and void. The only option they accept is the success side. As presented from the previous studies, profit generation is conducted in a way that presents a robust income in the market structure.

Criticism. The fundamental indexation is not accepting any form of loss in terms of their money generation. This bars the inevitable failure of any business. Any business is structured to lose and gain. Scholars agree that a particular business environment presents unpredictable challenges in the world of business, thus causing unplanned failures. Moreover, a single dependency of one bank over others shows bias and a lack of trust with the business environment.

References

Franklin, R. E. & Stav G. (2001). Hedge Funds: What Do We Know? Columbia University Business School. Accenture Journal Of Applied Corporate Finance.

Robert D. A et al. (2005). Fundamental Indexation. Financial Analyst Journal. Volume 61. Number Two.

Richard, J. B & Julie, R. D. (2001). Market Timing and Roulette Wheels. Association for Investment Management and Research.