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Hedge Fund

Hedge Fund

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Published by api-3838939

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Published by: api-3838939 on Oct 18, 2008
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03/18/2014

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1
INDEX
Section
CONTENTS
Pg. No.
EXECUTIVE SUMMMARY
3-4
1
HEDGE FUND
5-14
1.1
Defining the hedge fund
5
1.2
Hedge Fund and Other Pooled Investment Vehicles

6
1.2.1 Mutual Fund or Registered Investment
Companies

6
1.2.2 Private Equity Fund
6
1.2.3 Venture Capital Fund
7
1.2.4 Commodity Pool
7
1.3
Domestic and Offshore Hedge Fund
8
1.3.1 Domestic Hedge Fund
8
1.3.2 Offshore Hedge Fund
8
1.4
Fund of Funds
8
1.5
Hedge Funds by Strategy Types
10
1.6
Size of the Hedge Fund Market
10
1.7
Reasons for Rapid Growth of Hedge Fund Industry
12
1.8
Performance of Hedge Fund Industry
12
1.9
Market Benefits of Hedge Funds
13
2
HEDGE FUNDS IN DIFFERENT JURSDICTIONS
15-32
2.1
Hedge Fund Regulation in Other Markets
15
2.1.1 United States of America
15
2.1.2 United Kingdom
21
2.1.3 Switzerland
25
2.1.4 Germany
25
2.1.5 Offshore Centers
26
2.1.6 Ireland
27
2.1.7 Singapore
28
2.1.8 Hong Kong
28
2.1.9 Taiwan
28
2.1.10 Thailand
29
2
2.1.11 IOSCO
30
2.1.12 Highlights of Regulatory Review
31
3
FINANCIAL CRISIS AND HEDGE FUNDS
33-35
3.1
East Asian Crisis
33
3.2
Long Term Capital Management (LTCM)
33
4
REGULATORY ISSUE FOR ALLOWING
FOREIGN HEDGE FUNDS INDIA
36 -41
4.1
Hedge Funds in India
36
4.2
Relevant Provisions of FII Regulations
37
4.3
Identifying Hedge Funds
38
4.4
Investment Limits applicable to FIIs.
39
4.5
Additional Regulatory Concerns
40
3
EXECUTIVE SUMMARY

There is no exact definition to the term \u201cHedge Fund\u201d; it is perhaps undefined in any securities laws. There is neither an industry wide definition nor a universal meaning for \u201cHedge Fund\u201d. Hedge funds, including fund of funds, are unregistered private investment partnerships, funds or pools that may invest and trade in many different markets, strategies and instruments (including securities, non-securities and derivatives) and are not subject to the same regulatory requirements as mutual funds.

The term \u201chedge funds\u201d, first came into use in the 1950s to describe any investment fund that used incentive fees, short selling, and leverage. Over time, hedge funds began to diversify their investment portfolios to include other financial instruments and engage in a wider variety of investment strategies. However, hedge funds today may or may not utilize the hedging and arbitrage strategies that hedge funds historically employed, and many engage in relatively traditional, long only equity strategies.

Other unregistered investment pools, such as venture capital funds, private equity funds and commodity pools, are sometimes referred to as hedge funds. A lthough all of these investment vehicles are similar in that they accept investors\u2019 money and generally invest it on a collective basis, they also have characteristics that distinguish them from hedge funds. Hedge Fund Investment strategies tend to be quite different from those followed by traditional asset managers. M oreover, each fund usually follows its own proprietary strategies.

Hedge funds have attracted significant capital over the last decade, triggered by successful track records. The global hedge funds volume has increased from US $ 50 billion in 1988 to US $ 750 billion in 2003 yielding an astonishing cumulative average growth rate (CA GR) of 24 %. The global hedge f und volume accounts for about 1% of the combined global equity and bond market. Hedge funds are a growing segment of asset management industry and increasingly becoming popular not only with high net worth individual investors but also with institutional investors including university funds, pension funds, insurance and endowments. Hedge funds are sometimes perceived to be speculative and volatile. However, not all funds exhibit such characteristics.

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