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A fund whose objective is to produce
absolute, positive returns, not just to outperform a benchmark.
An institution or high-net-worth individual that meets the following
criteria for investing in hedge funds (as defined by the U.S. Securities
and Exchange Commission):
1) an individual
who has made $200,000 per year in income for the
past two years and has a reasonable expectation
of doing so in the future
2) an individual
and spouse with aggregate income of $300,000 per
3) an individual
with a net worth of $1 million or more,
excluding home and automobile.
An investment’s annualized return minus a benchmark’s
act as the unofficial CFO of a hedge fund, offering a wide variety of
services ranging from NAV calculation to tax services.
The primary function of the administrator is
to provide independent calculation of the NAV. This role is increasingly
required by investors who are often uncomfortable when they see a fund
valuing its own portfolio.
A portfolio managed by an external portfolio manager. The holder of
the advisory portfolio acts as an advisor, providing investment
recommendations to the portfolio manager.
growth investment strategy
An investment strategy that strives to produce the greatest possible
return through investment in highly speculative or relatively risky assets,
leveraging to the extent possible.
Association for Investment Management and Research.
A measure of the value-add of an investment manager. Typically, a
manager's performance is compared to that of a Treasury Bill or other risk-free investment.
If a funds performance for a given period exceeded the return of the
benchmark by two percentage points, it would be said to have an alpha of
2.0 for that period.
managed assets that have a low correlation to traditional public
markets. This low correlation creates significant portfolio benefits
through risk reduction and return enhancement. Alternative investments
seek to capitalize on market inefficiencies while neutralizing the
overall direction of the capital markets and interest rates. Alternative
investments employ techniques and instruments that are unavailable to
traditional investment approaches and may invest in either listed or
unlisted companies or securities. Alternative investments include hedge
funds, private equity, real estate, oil and gas, and timber.
rate of return
Compounded gain or loss in a fund's net
asset value during a calendar year.
Average compound annual return for a period >1 year.
The simultaneous purchase
and sale of similar instruments in different markets to take advantage
of price discrepancies.
An investment type, such as commodities, cash, stocks, bonds, real estate, etc.
Assets Under Management.
annual return (AAR)
Cumulative return divided by the
number of years of the life of the investment or account, with the
compounding factored in. In reverse, the average annual return times a
given number of years equals the cumulative return for that time frame.
AAR is used to compare returns of two or more investments of unequal
Cumulative gains and losses divided by the number of months of the
investment's life, with compounding taken into account.
rate of return
The mean average of a fund's returns over x number of periods. Calculated by dividing the sum of the rates of return
for those periods
by the number of periods.
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