Hedge funds have been faced with a variety of new challenges as a result of the ongoing financial crisis. The simultaneous collapse of major financial institutions that were their trading counterparties and service providers, fundamental and systemic increases in market volatility and illiquidity, and unrelenting demands from investors to redeem their hedge fund investments have conspired to make the climate for hedge funds extremely uncomfortable. As a result, many funds have failed or been forced to close due to poor performance. Managing Hedge Fund Risk and Financing: Adapting to a New Era brings together the many lessons learned from the recent crisis.
Advising hedge fund managers and CFOs on how to manage the risk of their investment strategies and structure relationships to best insulate their firms and investors from the failures of financial counterparties, the book looks in detail at the various methodologies for managing hedge fund market, credit, and operational risks depending on the hedge fund's investment strategy. Also covering best practice ISDA, Prime Brokerage, Fee and Margin Lock Up, and including tips for Committed Facility lending contracts, the book includes everything you need to know to learn from the events of the past to inform your future hedge fund dealings.
- Shows how to manage hedge fund risk through the application of financial risk modelling and measurement techniques as well as the structuring of financial relationships with investors, regulators, creditors, and trading counterparties
- Written by a global finance expert, David Belmont, who worked closely with hedge fund clients during the crisis and experienced first hand what works
- Explains how to profit from the financial crisis
In the wake of the Financial Crisis there have been calls for more stringent management of hedge fund risk, and this timely book offers comprehensive guidelines for CFOs looking to ensure world-class levels of corporate governance.
About the Author ix
Introduction: Managing Complexity and Uncertainty xiii
Chapter 1: The Quick and the Dead: Lessons Learned 1
Chapter 2: An Integrated Approach to Hedge Fund Risk Management 33
Chapter 3: A Survey of Hedge Fund Strategies and Risks 83
Chapter 4: Analysis of the Risk/Return Profile of Hedge Fund Strategies 143
Chapter 5: Managing Funding Risk 239
Chapter 6: Managing Counterparty Risk 299
Chapter 7: Risk Management for Hedge Fund Investors 315
Chapter 8: Conclusion 345
Appendix 1 349
Appendix 2 353
Appendix 3 355