M.Sc. Global Banking & Finance
Lecturer: | John Diamondopolus |
Module: | Alternative Investments |
Submitted by | Josip Sestan, Chetanna Chukwudum |
Submitted: | 06.04.2014 |
1 Overview of Hedge Funds Strategies 1
2 What are Emerging Markets and why are they so important? 2
3 Why do Hedge Funds invest in Emerging Markets 6
4 DWS Invest Global EM Equities LC 8
4.1 Inside the DWS Invest Global EM Equities LC fund 8
4.2 Performance of the fund 10
5 Hedge Funds Performance in EM scientific paper review 11
6 Hedge Funds Strategies in EM and Africa 12
6.1 Investment ...view middle of the document...
a. | Per annum |
P&L | Profit and loss |
vs. | versus |
Overview of Hedge Funds Strategies
Hedge Fund strategies can be categorized into three main strategies. The following table gives an overview.
Table 1: Hedge Fund Strategies
Directional | Event Driven | Relative Value |
Global Macro | Merger arbitrage | Fixed-Income Arbitrage |
Long Short | Distressed securities | Quant Traders |
Emerging Markets | | |
Directional hedge fund strategies like global macro take positions in equity, bonds and currency to speculate on global macroeconomic events that will trigger and lead to huge gains in their position. Long short strategies add the possibility to short assets. Emerging Markets (EM) hedge funds belonged to this category of hedge funds. The funds invest mainly in emerging markets equities, bonds, currencies or real assets to gain an oboe average return. Event-Driven strategies try to allocate special events that will lead to huge market changes and try to participate from those market changes. Relative Value strategies are assuming perfect markets and always take the opposite direction when they think that the market has moved from these boundaries.
What are Emerging Markets and why are they so important?
Although there is no exact definition of “emerging market countries”, these are countries in the process of developing. They typically have per-capita incomes on the lower to middle end of the world range, and are in the process of moving from a closed market to an open market. Emerging market countries include a wide range of nations, categorized into BRICS, Middle East Africa etc. Although only around 20% of the world’s nations are considered emerging market countries, these countries constitute approximately 80% of the global population. The following chart describes the main differences between emerging market countries and developed markets countries. This chart has been taken from Fidelity Worldwide Investments (Fidelity, 2009).
Figure 1: Emerging Markets vs. Developed Markets
The most important fact is that 80% of the global population lives in emerging markets countries. Nearly 80% of the land mass and foreign currency reserves is distributed among EM countries. But the market capitalization in these countries is less then 20% of the globally market capitalization and the GDP captures only 40% of the worldwide GDP. The following chart shows that emerging markets already have outperformed the developed markets when it comes to GDP growth. Between 2010 and 2013 emerging markets had a procentual GDP growth between 5% and 6%, compared to developed markets who only had a growth rate between 0% and 1%. (Black Rock, 2012)
Figure 2: Emerging Markets vs. Developed Markets GDP growth in percentage
We have seen before that current numbers show that 80% of the worldwide population lives in emerging markets countries. The next chart especially describes the development of the working-age...