Introduction to alternative investing & hedge funds by Murray Priestley

1. Murray Priestley
Founder & Managing Director
älpha Holdings Management

2. • Alfred Winslow Jones in 1949
• Fund that bought long & sold short to
“hedge” the portfolio
• 670% return over 10 years (compared to
the normal 358% for fund managers)
Father of the Hedge Fund

3. Father of the Hedge Fund

4. 140
US Hedge Funds in 1968

5. US Hedge Funds Today
15,60
0Est. $2 trillion FUM

6. Styles of
Investing

7. Arbitrage
Simultaneously buy GOLD at $1000 in New York
and sell GOLD at $1050 in London.

8. Convertible
ArbitrageSimultaneously purchase convertible securities
while shorting the stock.

9. Fixed Income
ArbitrageInefficiencies in pricing bonds.
“Picking up cents in front of a steam roller”

10. Statistical Arbitrage
Mis-pricing of one or more assets. “Quants”
Pairs trading based on moving in and out of correlation.

11. Distressed
Taking advantage of bankruptcy
by buying assets cheap
Buy – Fix – Sell
Buy – Unpack – Sell Pieces

12. Long/Short Equities
Buying long and selling short

13. Global Macro
Global indexes, interest rates and currencies

14. George Soros
Made $1 billion during the 1992
Black Wednesday UK currency crisis

15. Managed Futures
Trading Commodities

16. Modern
Portfolio Theory

17. Risk vs. Return
Diversification leads to higher return
for less risk.

18. U Chart
Get the best risk return ratio at the tip of the U-curve.
Harry Markowitz, 1952

19. Performance
20% 30%

20. 20% 30%
USD1,000
USD10,000
USD100,000
USD1,000,000
USD10,000,000
USD100,000,000
USD1,000,000,000
1978 1984 1990 1996 2002 2008
Buffet
$3.4 Million
Simons
$474 Million
Performance

21. Performance Stats
CAGR%
The year-over-year growth rate of an
investment over a period of time.
Max Drawdown
The largest drop of a given asset within
a certain time period.
Sharpe Ratio
A measure of the excess return per unit
of risk in an investment asset

22. Backtesting
Strategies
Entry and exit rules
Risk
Correlation, position, total risk
Money Management
Risk per trade, equity curve
Timeframes
Trends occur 30% of time
Portfolio Mix

23. Performance

24. Fund Advantages
Larger time frames and
more buying power.

25. No commitment.
http://murraypriestley.com/
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