Hedge Funds: An Advanced

Investment Overview
Welcome to our comprehensive exploration of hedge funds4sophisticated
investment vehicles that have transformed the financial landscape. In this
presentation, we'll examine these complex instruments from their
fundamental principles to their operational mechanics and distinctive
strategies.

We'll analyze the unique characteristics that differentiate hedge funds from
traditional investment vehicles, trace their historical evolution, and investigate
the diverse approaches they employ to generate returns. Additionally, we'll
conduct a comparative analysis with conventional investment options and
examine the regulatory frameworks governing hedge funds across different
jurisdictions.

By the conclusion of this presentation, you'll gain valuable insights into the
intricate world of hedge funds and their significant influence on global
financial markets.

by vikrant kelkar
What Is a Hedge Fund?
Definition Key Features Investor Access
A hedge fund is a privately managed Professional fund managers actively Hedge funds are exclusively available
investment vehicle that pools capital direct hedge funds, utilizing a broad to high-net-worth individuals and
from accredited investors. These spectrum of financial instruments and institutional investors who satisfy
sophisticated funds employ diverse investment methodologies to achieve specific financial thresholds. These
strategies to generate returns in both target returns. These funds possess restrictions are implemented because
bullish and bearish market conditions. exceptional flexibility to adapt their hedge fund strategies often involve
They distinguish themselves from strategies in response to market complex financial mechanisms and
traditional investment funds through fluctuations, affording them may entail elevated risk profiles
their advanced trading techniques and significantly greater operational requiring substantial investment
alternative investment approaches. latitude than conventional investment sophistication.
vehicles.
Key Characteristics of Hedge
Funds
Flexible Investment Accredited Investors
Approach Only
Hedge funds utilize diverse Hedge funds are exclusively
investment strategies across available to accredited
multiple markets and asset investors with significant
classes. They employ financial resources. U.S.
sophisticated techniques regulations require investors
such as leverage and short- to possess either a net worth
selling to capitalize on profit exceeding $1 million
opportunities in global (excluding primary residence)
markets, regardless of or annual income of $200,000
economic conditions. individually ($300,000 for
couples) for two consecutive
years.

Absolute Return Focus

Unlike traditional investment vehicles that measure performance
against market benchmarks, hedge funds pursue absolute returns
independent of market direction. Their strategies aim to generate
positive performance while minimizing downside risk during market
downturns through active risk management techniques.
Main Goals of Hedge Funds
Generate Absolute Returns
Deliver positive performance regardless of market direction

Optimize Risk Management

Employ sophisticated strategies to mitigate downside exposure

Diversify Asset Allocation

Strategically distribute capital across uncorrelated investment
vehicles

Hedge funds strive to achieve consistent positive performance irrespective of broader market conditions. Unlike traditional investment
vehicles that benchmark against market indices, hedge funds pursue absolute returns through all economic cycles. Fund managers
implement rigorous risk management protocols to preserve capital while simultaneously seeking to maximize risk-adjusted returns
that exceed those typically available through conventional investment approaches.
Evolution and History
1949: The Beginning
Alfred Winslow Jones established the first hedge fund using a
revolutionary approach that combined long positions in
undervalued stocks with short positions in overvalued stocks.
His innovative use of leverage (borrowed money) to amplify
returns created the foundation for modern hedge fund
strategies.

1970s-1980s: Early Growth

Hedge funds evolved beyond Jones' original model, pioneering
sophisticated strategies for global market arbitrage and event-
driven investments. This diversification attracted institutional
investors and wealthy individuals seeking alternative investment
options.

1990s-Present: Explosion
The industry experienced exponential growth, expanding from
approximately $39 billion in assets in 1990 to over $3 trillion
today. This dramatic increase reflects hedge funds' mainstream
adoption as essential components of institutional portfolios and
wealth management strategies.
Hedge Fund Legal Structures
Limited Liability Companies
(LLCs)
Increasingly popular alternative in the US
Limited Partnerships (LPs) market

Predominant structure for US-based All members enjoy liability protection Offshore Corporations
hedge funds for personal assets Strategic structure for international

Offers flexible management investor participation

Features one general partner with
unlimited liability who manages arrangements and simplified tax Established in tax-efficient
operations reporting jurisdictions to optimize returns
Limited partners contribute capital Key locations include the Cayman
with liability restricted to their Islands, British Virgin Islands,
investment amount Luxembourg, and Ireland
Pros & Cons of LP Structure
Advantages Disadvantages
Pass-through taxation eliminates double taxation at General partner bears unlimited personal liability for fund
partnership level obligations
Well-established legal structure familiar to investors and Limited partners forfeit limited liability if they participate in
regulators management
Clear separation of responsibilities between managers (GP) General partner faces self-employment tax on earned
and investors (LPs) income
Limited partners' financial liability is restricted to their capital Annual regulatory filings and compliance requirements
contribution Limited partnership interests typically lack liquidity in
Flexibility in profit allocation and distribution arrangements secondary markets

The Limited Partnership structure remains the predominant choice for US-based hedge funds due to its favorable tax treatment and
well-defined governance framework. To mitigate liability exposure, fund managers typically establish a separate limited liability entity
to serve as the general partner, effectively creating a liability shield while preserving the partnership's tax advantages.
Pros & Cons of LLC Structure
Advantages Disadvantages
LLCs provide exceptional flexibility through customizable Despite its versatility, the LLC structure comes with certain
operating agreements that can adapt to various business needs. limitations. Foreign investors often face complicated tax
Every member receives robust liability protection regardless of reporting requirements, while many institutional investors prefer
their management involvement. the traditional familiarity of LP structures.

Limited liability shields all members' personal assets Less recognized by certain investor classes
Highly adaptable management structure Potentially higher state filing and maintenance fees
Beneficial pass-through taxation avoids double taxation Complex tax implications for non-US investors
Popular Fund Structures: Parallel and Master-
Feeder

Master Fund
Central investment vehicle holding all portfolio assets

Feeder Funds
Specialized entry points customized for different investor categories

Parallel Structure
Identical investment funds established across multiple
jurisdictions

Master-feeder structures excel for funds with diverse investor profiles. The master fund centralizes all investment activity, while feeder
funds serve as tailored gateways for specific investor segments. Typically, US taxable investors utilize a domestic US feeder, while
international and tax-exempt investors access an offshore feeder to optimize tax efficiency.

Parallel structures maintain separate but identical investment portfolios across different jurisdictions. Each entity maintains its own
legal framework and financial reporting, creating operational complexity but enabling compliance with varying regulatory requirements
across multiple countries. This approach particularly benefits funds with region-specific investment strategies.
Main Parties Involved
General Partner/Investment Manager
The firm that establishes and manages the fund. They execute all
investment decisions, oversee daily operations, and earn management
and performance fees. Key portfolio managers typically hold partnership
positions within this firm.

Limited Partners/Investors
Entities that provide capital without participating in fund
management. These typically include institutional investors such as
pension funds and endowments, as well as family offices and high-
net-worth individuals who satisfy specific financial eligibility criteria.

Service Providers
External specialists who deliver critical support functions,
including prime brokers, fund administrators, legal counsel,
independent auditors, and compliance consultants. These
professionals provide the specialized expertise essential for
proper fund operations and regulatory adherence.
Prime Broker Role
Margin Securities Custody Services Trade Execution
Financing Lending Safeguards fund Offers sophisticated
Provides leveraged Facilitates short-selling assets, settles trading platforms and
capital to funds, by sourcing and transactions, and global market access,
enabling investment lending securities that delivers complemented by
positions larger than funds need to borrow, comprehensive proprietary trading
their existing capital monitoring these reporting on holdings, technology and
base. Uses the fund's positions, and risk exposures, and analytical tools.
portfolio assets as managing collateral performance metrics.
collateral against these requirements.
loans.
Hedge Fund Administrator Role
Fund Accounting
NAV Calculation
Maintains comprehensive financial
Performs independent verification of
records, generates detailed
the fund's Net Asset Value, providing
performance reports, and prepares
crucial third-party validation that
essential tax documentation for
ensures accurate valuation of all
regulatory compliance and investor
investments and portfolio holdings
transparency

Regulatory Reporting Investor Services

Ensures timely completion of Facilitates capital subscriptions,
mandatory governmental filings and redemptions, and transfers while
assists with complex multi-jurisdictional maintaining authoritative investor
compliance requirements across global registry and handling all shareholder
regulatory frameworks communications
Auditors, Legal, and Other
Service Providers
Legal Counsel Auditors
Provides comprehensive legal Conducts annual financial
guidance for fund statement examinations,
establishment, regulatory verifies asset existence, and
compliance, and investor ensures accounting standard
documentation. Drafts adherence. Typically
essential materials including represented by a prestigious
offering memoranda and accounting firm that
partnership agreements. enhances credibility with
Advises on legislative institutional investors while
developments and regulatory satisfying regulatory
changes impacting fund requirements.
operations.

Compliance Consultants
Develops and implements robust compliance frameworks, performs
periodic assessments, and facilitates regulatory inspections. Their
significance continues to increase as regulatory scrutiny of hedge
funds intensifies across global jurisdictions.
How Funds Are Created and
Run
Establishing the Fund
Develop legal entity structure and complete regulatory
filings
Draft offering memorandum and partnership agreements
Appoint and onboard essential service providers

Capital Acquisition
Develop pitch materials and articulate investment strategy
Conduct due diligence meetings with prospective investors
Facilitate subscription documentation and investor
onboarding

Portfolio Management
Implement investment thesis and strategic allocation
Execute trading strategies and position management

Monitor performance metrics and optimize portfolio

construction

Operations & Compliance

Perform NAV calculations and generate financial
statements
Distribute performance reporting and investor
communications
Maintain regulatory compliance and fulfill filing obligations
Typical Hedge Fund Investor Profile

Institutional Investors Family Offices Accredited Individuals

Pension funds, endowments, and These sophisticated investment entities High-net-worth individuals who satisfy
foundations typically allocate 5-15% of manage multigenerational wealth for ultra- regulatory financial thresholds for hedge
their portfolios to alternative investments high-net-worth families. They often fund participation. These investors
like hedge funds. This strategic embrace complex investment strategies typically seek capital preservation and
diversification helps optimize risk-adjusted with higher risk tolerances and can growth through strategies that offer
returns and provides decorrelation from commit substantial capital with longer asymmetric return profiles and reduced
traditional asset classes in their core lock-up periods than typical investors. correlation to broad market fluctuations.
holdings.
How Hedge Funds Balance Risk and Return
24

16

0
Treasury Bills Investment S&P 500 Index Global Long/Short Event-Driven Small
Grade Macro Equity... Hedge Cap
Bonds Hedge Funds Equities
Funds
Risk (Volatility) Return (%)

Hedge funds strategically position themselves in the investment spectrum, aiming to optimize the risk-return tradeoff by delivering
enhanced returns relative to fixed income while maintaining lower volatility than traditional equities. The risk profile varies significantly
across hedge fund strategies: market-neutral funds prioritize capital preservation with lower volatility, while global macro funds accept
higher risk for potentially greater returns. As illustrated in the chart, various hedge fund strategies occupy distinct positions along the
risk-return curve, offering investors tailored options based on their risk tolerance and performance objectives.
Liquidity Restrictions

1-3 years 30-90&

Lock-up Period Notice Period
Initial timeframe during which Advanced notification required
investors cannot withdraw their before funds can be withdrawn
capital

10%
Withdrawal Limit
Cap on percentage of investment
that can be redeemed at once

Hedge funds implement these restrictions to maintain capital stability for their
intended investment horizons. These measures protect the fund from forced
liquidations during market downturns, preserving value for all investors. For
allocators, these liquidity constraints represent a fundamental distinction from
more liquid investments like mutual funds and ETFs, which typically offer daily
redemption opportunities.
Hedge Funds vs Mutual
Funds (Detailed)
Feature Hedge Funds Mutual Funds

Who can invest Accredited/institutio Available to all

nal investors only investors

Regulatory Limited regulation, Heavily regulated

Environment greater flexibility (Investment
Company Act of
1940)

Investment Can short markets, Primarily long-only

Strategies use leverage, positions in
derivatives traditional assets

Transparency Minimal disclosure Full transparency

requirements with daily NAV,
quarterly reports

Liquidity Lock-up periods, Daily liquidity during

redemption windows market hours

Fee Structure 2/20 model (2% Lower expense ratios

management + 20% (typically 0.5-1.5%)
performance)

These structural differences stem from their distinct regulatory frameworks.

Mutual funds operate under the stringent Investment Company Act of 1940,
requiring liquidity, transparency, and accessibility for retail investors. In
contrast, hedge funds' exemption from these regulations allows for
sophisticated strategies and greater flexibility, but restricts participation to
qualified investors who can withstand higher risks and limited access to their
capital.
Hedge Funds vs Venture Funds
Hedge Funds Venture Funds
Trade securities in public markets with established Invest capital in early-stage private companies
companies Commit to extended investment periods (7-10+ years)
Maintain shorter investment horizons (typically months to Capital remains committed throughout the fund's lifecycle
years)
Create value through company development and strategic
Provide liquidity options on quarterly or annual basis guidance
Generate returns through existing market opportunities Primarily acquire equity positions without leveraging assets
Utilize leverage and sophisticated financial instruments Earn revenue through management fees plus carried interest
Structure fees as management percentage plus performance on profits
incentives

While both fund types cater to accredited and institutional investors, their investment philosophies differ significantly. Venture capital
deploys patient capital to nurture emerging companies toward substantial growth and market disruption, whereas hedge funds pursue
more immediate investment opportunities within liquid markets that permit efficient entry and exit strategies.
Hedge Funds vs ETFs (Exchange-Traded Funds)
Hedge Funds ETFs
Sophisticated investment vehicles that employ diverse Transparent investment funds that track specific indices,
strategies to generate returns regardless of market conditions. sectors, or asset classes with fully disclosed holdings. They
They utilize shorting, leverage, and derivatives to maximize trade continuously on exchanges like ordinary stocks. They
profits. They typically charge substantial fees (1-2% provide high liquidity, significantly lower expense ratios (typically
management plus 20% of profits). Limited to accredited 0.03-0.75%), and are accessible to all investors regardless of
investors with high net worth, and investments are often subject wealth. Most ETFs employ passive management without
to lockup periods and limited redemption windows. leverage or complex derivatives.

The fundamental distinction lies in their investment philosophy: ETFs primarily offer cost-effective market exposure through passive
index tracking, while hedge funds pursue market-beating returns through active management and sophisticated investment strategies
that command premium fees but potentially higher rewards.
Main Hedge Fund
Approaches
Directional Strategies
Long/Short Equity Positions
Global Macro Economic Analysis
Emerging Market Opportunities
Momentum-Based Trading

Arbitrage Strategies
Fixed Income Arbitrage
Convertible Arbitrage
Statistical Arbitrage
Market-Neutral Equity

Event-Driven Strategies
Merger Arbitrage
Distressed Securities
Activist Investing
Special Situations

Multi-Strategy Approaches
Diversified Strategy Allocation
Dynamic Capital Reallocation
Cross-Asset Diversification
Systematic Risk Management
Long/Short Equity Strategy

Long Positions (70-80%) Short Positions (20-50%) Net Exposure Management

The fund purchases securities it The fund borrows and sells securities it Portfolio managers strategically calibrate
determines are undervalued based on identifies as overvalued. This strategy long and short allocations to optimize the
fundamental analysis. These positions are generates profits when prices decline and risk-return profile. Maintaining a net long
established with the expectation of price the fund repurchases shares at lower exposure (typically 30-60%) preserves
appreciation, leveraging in-depth company valuations. Short positions additionally upside potential while significantly
research, growth trajectory assessment, serve as a portfolio hedge against broader reducing portfolio volatility compared to
and identification of market inefficiencies. market corrections. traditional long-only equity strategies.
Arbitrage (Relative Value)
Strategies
Convertible Arbitrage Merger Arbitrage
Exploits price inefficiencies Capitalizes on price
between convertible discrepancies in acquisition
securities and their underlying targets. Traders buy shares of
stocks. Investors typically the company being acquired
purchase convertible bonds while potentially shorting the
while shorting the related acquirer's stock. Profits derive
stock, generating returns from from the spread between
the bond's yield while current market price and the
maintaining protection final acquisition value
against equity price announced in the deal.
fluctuations.

Fixed Income Arbitrage

Identifies and leverages pricing anomalies across related fixed income
securities. Strategies include yield curve arbitrage, swap-spread trades,
and pair trading of similar bonds with temporary price divergences.
These approaches aim to capture small but consistent returns with
controlled risk.
Global Macro Strategy
Multi-Asset Execution
Economic Analysis
Allocate capital across diverse asset
Analyze global macroeconomic trends,
classes including foreign exchange,
monetary policy decisions, inflation
sovereign debt, equities, and
indicators, and GDP growth forecasts to
commodities based on comprehensive
identify market opportunities
macroeconomic outlook

Risk Management Directional Positioning

Implement sophisticated hedging Establish significant long or short
techniques and strategic position sizing positions in anticipation of substantial
to mitigate downside exposure and market movements driven by
optimize risk-adjusted returns macroeconomic catalysts

Global macro strategy gained prominence through legendary investors like George Soros and Julian Robertson. This approach
demonstrates optimal performance during significant economic transitions or market dislocations, as these environments generate
exceptional trading opportunities across multiple asset classes.
Event-Driven Strategy

Event-driven strategies capitalize on price dislocations created by significant corporate events. These catalysts include mergers and
acquisitions, tender offers, bankruptcies, corporate restructurings, and spin-offs. When these events occur, temporary market
inefficiencies often emerge. Success in this strategy requires deep expertise in corporate law and financial analysis to accurately
assess both the probability of event completion and its potential price impact.

During periods of heightened corporate activity, this strategy can generate attractive risk-adjusted returns with low correlation to
broader market indices. However, caution is warranted during market crises, as deal breaks can occur rapidly and potentially trigger
substantial drawdowns in portfolio value.
Systematic vs Discretionary Strategies
Systematic Strategies Discretionary Strategies
Employ sophisticated mathematical models and algorithms to Depend on human expertise and analytical judgment to guide
identify trading opportunities with minimal human intervention. investment decisions. Portfolio managers evaluate
These quantitative approaches analyze historical market data, macroeconomic conditions, fundamental company analysis, and
recognize patterns, and apply statistical methods to inform market sentiment to identify potential opportunities.
trading decisions.
Adapt flexibly to evolving market conditions and unexpected
Adhere to predefined rules that eliminate emotional biases events
Process and analyze vast quantities of market data Incorporate qualitative information that resists quantification
simultaneously Leverage human intuition developed through market
Utilize backtesting on historical data to validate strategy experience
efficacy Excel at recognizing paradigm shifts and major market
Execute transactions at high frequency (often in inflection points
milliseconds)
Leverage and Derivatives in Hedge Funds
Leverage Application
Hedge funds typically employ leverage ratios of 2:1 to 5:1, amplifying their
capital deployment capacity. Some specialized strategies may utilize even
higher ratios. While leverage can significantly enhance returns, it
proportionally magnifies losses, creating an asymmetric risk-reward profile
that requires sophisticated risk management.

Options Strategies
Funds deploy puts and calls strategically to establish directional market
positions, hedge portfolio exposures, and generate premium income. These
derivatives enable funds to gain exposure to price movements with
reduced capital requirements while maintaining precisely defined risk
parameters.

Futures and Swaps

Futures and swaps provide efficient exposure to commodities, indices,
interest rates, and currencies without requiring full asset ownership. These
instruments feature lower initial margin requirements and facilitate
sophisticated trading strategies focused on market trends, arbitrage
opportunities, and relative value discrepancies.
Typical Hedge Fund
Investment Process
Idea Generation
Identify strategic opportunities through comprehensive
research and quantitative analysis. Target market
inefficiencies, corporate catalysts, macroeconomic shifts, and
statistical arbitrage patterns.

Fundamental Analysis
Evaluate investment thesis using sophisticated financial
modeling and rigorous risk assessment. Stress-test potential
outcomes across multiple market scenarios and conditions.

Portfolio Construction
Determine optimal position sizing and comprehensive risk
exposure. Strategically balance expected returns against
drawdown potential and liquidity considerations.

Monitoring & Adjustment

Continuously evaluate performance metrics and validate
original investment thesis. Implement dynamic position
adjustments based on evolving market dynamics and new
information.
US Hedge Fund Regulation
SEC Registration Dodd-Frank Act Regulatory Exemptions
Requirements Disclosures Hedge funds operate under
Investment advisers managing over Following the 2008 financial crisis, specific exemptions from the
$150 million in hedge fund assets the Dodd-Frank Act established Securities Act of 1933 and
must register with the Securities enhanced regulatory oversight. Investment Company Act of 1940.
and Exchange Commission. Substantial hedge funds must now These provisions allow them to
Registration mandates compliance file Form PF, providing detailed avoid securities registration
with fiduciary standards, disclosure information about leverage requirements and provide greater
of material information, and positions, trading exposures, and flexibility regarding investment
implementation of comprehensive potential systemic risk strategies, leverage utilization, and
compliance programs. contributions to regulators. fee structures.
India: Hedge Fund Regulation
SEBI AIF Category III Framework
Comprehensive regulatory structure for hedge funds

Investment Restrictions
2
Conservative limits on leverage and cross-border investments

Investor Qualifications
High entry threshold of ¹1 crore (approximately $120,000)

The Securities and Exchange Board of India (SEBI) established a robust regulatory framework for hedge funds in 2012 under the
Alternative Investment Funds (AIF) Category III classification. This framework governs entities employing complex trading strategies,
derivatives, and leverage while implementing specific risk management requirements.

Indian regulations impose more conservative leverage restrictions compared to those in the US or UK markets, typically capping
borrowing at 2x of fund assets. Additionally, funds must implement sophisticated risk management systems and submit
comprehensive periodic disclosures to regulators detailing their portfolio composition, exposure levels, and potential systemic risk
factors.
UK Hedge Fund Regulation
Snapshot
FCA Authorization AIFMD Compliance
The Financial Conduct Authority Under the Alternative Investment
requires hedge fund managers to Fund Managers Directive, UK
secure authorization before hedge funds must adhere to
commencing investment comprehensive governance
operations. The FCA thoroughly standards covering disclosure
evaluates the qualifications of requirements, depositary
key personnel, assesses capital appointments, remuneration
adequacy, and scrutinizes the policies, and risk management
robustness of compliance protocols. These provisions are
frameworks to ensure market designed to enhance investor
integrity. protection and monitor systemic
risk factors.

Reporting Obligations
UK hedge funds must submit regular regulatory filings detailing portfolio
compositions, leverage exposures, liquidity risk profiles, and stress
testing outcomes. Funds of significant size face enhanced reporting
requirements regarding potential impacts on broader financial stability
and market dynamics.
Hedge Fund Fee Structure: 2 and 20

Management Fee (2%) Performance Fee (20% of Pro... Net Return to Investors

The standard "2 and 20" hedge fund fee structure consists of two components. The first is a fixed 2% annual management fee
calculated on total assets under management, which covers operational expenses, staff salaries, and research costs. The second is a
performance-based 20% fee charged on profits that exceed a predetermined benchmark return, incentivizing fund managers to
generate strong results.

Most hedge funds implement a "high-water mark" provision, ensuring that performance fees only apply to new profits4managers must
first recover any previous losses before earning additional performance fees on future gains. In the illustrated example, a $100M fund
generating a 10% annual return ($10M) would distribute the proceeds as follows: $2M for management fees (2% of $100M assets),
$2M for performance fees (20% of the $10M profit), leaving investors with $6M net return (a 6% actual yield on their investment).
Recent Examples:
Bridgewater Associates

$140B+ 1975
Assets Under Management Founded
World's largest hedge fund By Ray Dalio

300+
Institutional Clients
Including sovereign wealth funds

Founded by Ray Dalio in 1975, Bridgewater Associates has grown to become

the world's largest hedge fund. The firm revolutionized investment
management with its pioneering "Pure Alpha" and "All Weather" strategies.
These sophisticated approaches blend macroeconomic analysis with
systematic risk management protocols. Bridgewater leverages over 100
distinct investment methodologies to deliver consistent performance across
diverse market conditions.

Bridgewater's distinctive corporate culture centers on what Dalio terms

"radical transparency." This philosophy encourages open discourse where
employees at all levels can challenge ideas and assumptions without
hierarchical constraints. Dalio codified these organizational principles in his
influential book "Principles," which has gained widespread recognition. The
firm employs proprietary technological tools designed specifically to facilitate
candid feedback and meritocratic decision-making throughout the
organization.
Recent Examples: UK Hedge Fund Leaders
Man Group Brevan Howard
Established in 1783, Man Group has evolved into one of the Established in 2002 by Alan Howard, Brevan Howard has risen to
world's largest publicly traded hedge funds, managing prominence as one of Europe's premier hedge funds, overseeing
approximately $145 billion in assets. The firm employs both approximately $20 billion in assets. The firm specializes in
quantitative, algorithm-driven strategies and traditional global macro strategies, focusing primarily on identifying
discretionary investment approaches across its three core economic trends and opportunities in interest rate movements
divisions: AHL, GLG, and Numeric. and currency markets.

Prominently listed on the London Stock Exchange Strategically headquartered in London and Geneva to access
Pioneer in systematic and quantitative trading technologies global markets

Offers a diverse portfolio of investment products across Demonstrated exceptional performance during the 2008
multiple asset classes financial crisis, delivering positive returns
Employs specialized trading teams with deep expertise in
specific market segments
Recent Examples: Avendus
Absolute Return Fund
Market Leadership Investment Approach
One of India's largest Employs a long-short equity
Category III Alternative strategy focused on Indian
Investment Funds managing securities. The fund primarily
approximately $400 million in maintains long positions
assets. Established in 2017, while strategically utilizing
the fund has consistently hedging instruments to
outperformed market mitigate downside risk during
benchmarks while periods of market turbulence.
maintaining lower volatility
and risk exposure.

Management Expertise
Led by industry veterans Andrew Holland and Vaibhav Sanghavi, who
possess extensive experience navigating Indian capital markets. The
investment team implements a hybrid approach combining
fundamental company analysis with quantitative modeling to identify
optimal investment opportunities.
Current Issues & Trends in
Hedge Funds
ESG Integration
Hedge funds increasingly incorporate Environmental, Social,
and Governance criteria into investment processes. Leading
firms are developing sophisticated ESG methodologies to meet
institutional investor demands and capitalize on sustainability-
driven market opportunities.

Fee Compression
The traditional "2 and 20" fee structure faces significant
pressure in today's market. Funds now implement tiered fee
models, preferential terms for early investors, and
performance-based incentive structures to maintain
competitiveness and attract capital commitments.

Rise of Quantitative Strategies

Algorithm-driven and data-centric investment approaches
continue to gain prominence across the industry. Forward-
thinking firms are substantially investing in artificial
intelligence, machine learning capabilities, and alternative data
sources to establish sustainable competitive advantages.

Increasing Regulatory Scrutiny

Regulatory oversight has intensified globally with heightened
focus on private fund operations. Current priorities include
4
enhanced transparency requirements, systemic risk monitoring,
and operational resilience mandates, creating new compliance
challenges and operational considerations.
Conclusion & Takeaways

Evolving Landscape
Significant Market Impact The industry continuously adapts to
Complex Investment Vehicles With over $3 trillion in global assets under technological innovations, evolving
Hedge funds employ sophisticated, management, hedge funds significantly investor preferences, and regulatory
diverse strategies to generate returns influence market dynamics, price developments. Successful fund managers
across market conditions. Their discovery, and capital allocation. While must navigate these changes while
adaptability and flexibility distinguish they often provide liquidity and market maintaining a disciplined focus on alpha
them fundamentally from traditional stabilization through contrarian positions, generation.
investment vehicles. they can occasionally amplify market
volatility.

A comprehensive understanding of hedge funds requires balanced consideration of both their potential benefits and inherent risks. For
qualified investors, they can provide portfolio diversification and enhanced returns when strategically selected and diligently
monitored. However, their complexity and heterogeneous performance characteristics underscore the critical importance of thorough
due diligence.