Managing Hedge Fund Risk and Financing : Adapting to a New Era

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  • Edition: 1st
  • Format: Paperback
  • Copyright: 2011-09-13
  • Publisher: Wiley
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Hedge funds experienced a new challenge during the recent 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 which led to mark to market losses and increased demands for margin from their creditors, and lastly unrelenting demands from investors to redeem their hedge fund investments.#xA0; Many hedge funds were unprepared for the maelstrom that engulfed them and many have failed or been forced to close due to resulting poor performance. This book encapsulates the lessons learned from the recent crisis and advises hedge fund managers and CFOs how to manage the risk of their investment strategies and structure relationships to best insulate their firms and investors from failure of financial counterparties so that their funds can remain free to take full advantage of opportunities presented by financial crises. Risk management and maintaining funding liquidity are critical to differentiating a fund#x19;s performance in a crisis. Avoidance of losses in the fund#x19;s investment portfolio via effective risk management is only part of the solution. Having the ability to maintain or increase leverage and liquidity due to having negotiated binding lock ups and committed facilities with your prime brokers, and matching portfolio liquidity with potential investors redemption demands are also critical to maintaining a funds ability to opportunistically profit from a crisis.

Author Biography

David Belmont has over 19 years of buy side and sell side risk management experience gained as a Chief Risk Officer, hedge fund risk manager, hedge fund investor, and a hedge fund lender. David is currently the Chief Risk Officer for Commonfund, a manager of US$27 billion of long term client assets across hedge funds, private equity, real estate, commodities, fixed income and equities. Previously, David was the Head of Risk Management for Temasek Holdings, the Singapore sovereign wealth fund, where in addition to risk-managing the direct investing, Private Equity, and long-only investments, David risk-managed Temasek’s internal hedge fund strategies and its third party hedge fund investing. Earlier in his career, David was the risk manager for Cargill’s Financial Markets Group, the precursor to the multi-strategy hedge fund, Black River Asset Management. Subsequently, David was the Director of Risk for Nexgen Capital, a closely held hedge fund active in emerging markets, credit arbitrage, volatility arbitrage, and natural catastrophe bonds.

David’s sell side experience comes from his recent role as Global Head of Hedge Fund Risk Credit at UBS Investment Bank and as Head of Risk Management for UBS Prime Brokerage in the Americas.

David holds Master of Business Administration and Master of Science degrees from Yale University and is a Chartered Financial Analyst.

Table of Contents

Introduction: Managing Complexity and Uncertainty
The Quick and the Dead: Lessons Learned
An Integrated Approach to Hedge Fund Risk Management
A Survey of Hedge Fund Strategies and Risks
Analysis of the Risk/Return Profile of Hedge Fund Strategies
Managing Funding Risk
Managing Counterparty Risk
Risk Management for Hedge Fund Investors
p. 1
p. 2
p. 3
Table of Contents provided by Publisher. All Rights Reserved.

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