WORKSHOP 3, October 24: Understanding the nuts and bolts of hedge fund trading and risk taking

Led by Bernard Lee is Founder and Chief Executive of investment analytics firm HedgeSPA and Professor of Practice at the highly-rated Leavey School of Business at Santa Clara University, the oldest college in the State of California. Analyses and insights in this book were developed by working with commercial and public investors managing multi-asset portfolios with comparable size, complexity and investment objectives.

8:30 Registration and breakfast

9:00 Asset class overview

  • Statistical properties of hedge fund returns
  • Limits to diversification and optimal number of funds
  • Tail risk versus upside potential
  • Performance metrics
  • Fung and Hsieh-type models

10:30 Morning coffee break

11:00Security selection and market neutral strategies

  • Equity valuation models and security selection
  • Market impact, slippage and trading costs
  • Merger arbitrage and event driven
  • Implementation issues in systematic trading and model-based trading
  • Equity market-neutral / statistical arbitrage

12:30 Lunch

1:30 Derivative, arbitrage, macro and trend-based strategies

  • CTA/Macro trading (examples from currency and commodity markets)
  • Options arbitrage
  • Convertible arbitrage
  • Fixed income arbitrage: curve and spread trading
  • Credit structure arbitrage

3:00 Afternoon coffee break

3:30 Investment issues

  • FX and net exposure overlay hedging
  • Structured products, alpha transfer products
  • Pricing and hedging of structured products
  • Overview of regulatory issues
  • Drivers for major hedge fund failures

5:00 End of workshop

Target audience:

Asset Allocator of Institutional Investors
Hedge Fund Analysts
Family and Multi-Family Offices
Private Bank Relationship Managers
Multi-asset Investment Advisors

About the course

This popular course was offered once some time ago. Subsequently, Prof. Lee was disallowed from offering it again despite audience demand to hold it at multiple locations globally, for the fear of it giving away the "secret sauces" of his then employer. Prof. Lee was a key member of the BlackRock portfolio team who made the difficult decision to pay a steep penalty to exit from Amaranth right before its demise. That success story was recently reported by a book entitled "Hedge Hogs" by Barabara T. Dreyfuss.
The initial session of this course begins by giving an overview of hedge funds as an asset class and particular it return characteristics. Session two focuses on equity-based strategies. Session three concerns investing in relative value strategies. The last session will focus on real-life issues related to investing in hedge funds, framed in the context of multi-asset portfolios. This course will be a combination of discussions and hands-on sessions (for participants who will bring along their own lap-tops with their own internet connection.)

Course Highlights
• Combination of cutting-edge research and proven practical investment insights
• Use of hands-on sessions to analyze and better understand relevant hedge fund strategies
• Unlike similar courses, this course is about investing in hedge funds within a multi-asset portfolio


Learning Outcomes
• Detailed understanding of key literature on hedge fund research
• Ability to perform a basic return versus risk analysis on key hedge fund strategies
• Awareness in spotting "what may go wrong" based on a real-life-like portfolio and (often) embellished marketing materials
• Comprehensive understanding of how to effectively invest in hedge funds within multi-asset portfolios
• Understanding that success in hedge fund investing is often more about diligence and attention to details

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