So, a hedge fund is a privately regulated financial institution. It is somewhat less subject to legislative influence than, for example, a bank. Investors' invested capital is transferred to professional financiers for management. In the future, the profit they receive is distributed among investors.

In other words, hedge funds are institutions whose work is aimed at accumulating capital from investors for the purpose of further investing it in order to make a profit.

Interestingly, in the United States, a hedge fund, in accordance with the law, can only serve professional-level investors. If we are talking about private investors, then the minimum down payment for them is limited to $5 million, and if we are talking about institutional investors, then the “pass” for them will cost from $25 million.

Back in the 40s of the last century, a hedge fund was created, which became the first institution of this type. However, investment hedge funds became widespread after the 1980s. It was at that time that a separate layer of financial organizations was formed: they predicted economic and political trends, and based on this they created investment portfolios. It is interesting that more than 30% of companies of this type are located in the capital of England, and slightly less in the USA.

The investment fund of George Soros became legendary; in 1992, his hedge fund “Quantum Group” earned $1 billion (in 1 day!) on the foreign exchange market when the British currency fell. This day in history is recorded as "Black Wednesday (1992)". It is also worth noting that with these actions George Soros rolled back the UK economy several years ago.

These days, a hedge fund can rightfully be called a popular institution among serious foreign investors. Such an organization can more freely dispose of the attracted capital without breaking the law, which allows it to plan various strategies and is more likely to receive the desired profit. This does not entirely correspond to the situation in Russia, but it is true for the global space.

Therefore, every novice investor should know what an investment fund is in general, and a hedge fund in particular.

In this section we looked at what an investment hedge fund is, and in the next section we will look at how it works.

How does an investment hedge fund work?

To understand how a hedge fund makes a profit, you need to understand its operating methods. Perhaps this is what we will do. As mentioned, a hedge fund has more freedom in choosing investment strategies than other financial institutions. This opens up access to more profitable investment areas, which means it increases the likelihood of success for the company, because you can choose the best instruments from a huge financial market.

While many other institutions can afford to implement capital allocation strategies and are subject to numerous regulations, hedge funds operate with a free hand. That is why they often make a profit not only in a growing, but also in a falling market.

Moreover, a hedge fund has the opportunity not only to use almost any investment strategy, but also to independently choose the method of managing the attracted capital. Because of this freedom, some hedge funds generate income even by documenting the resale of assets in different markets using price differences.

Investors who choose a particular hedge fund become co-owners of its portfolio. The desire of managers to make a profit on the funds raised is obvious, because this ensures their income.

Finally, some investment vehicles are too expensive for the private capitalist. It is not always possible to purchase them at your own expense. Hedge funds, by creating pools, are able to work even with the most expensive assets.

So investment funds are your opportunity to increase your capital.

Hedge funds in Russia: realities and trends

If you analyze the situation on the domestic financial market, you can easily notice that hedge funds, for the most part, have been demonstrating negative returns lately. This is due to the fall in the securities market.

And this, in turn, speaks of imperfect management. Every Russian hedge fund in a downturn these days is losing investors' money. By definition, hedge funds must and are able to make a profit in any market situation, because the choice of investment strategies for them is almost unlimited.

Even from the name, the word “hedge” suggests that the manager is insuring himself against potential losses. And if in the West a hedge fund is a reliable institution that consistently brings up to 20% profit per year with negligible risk, then in the CIS the situation is not so colorful.

There are about 13 thousand funds of this type all over the world today. They have a capital of 2.5 trillion at their disposal. dollars. In Russia, there are now about six dozen such institutions. The same number of them was in the USA as of the mid-80s of the last century.

Therefore, it can be noted that the market where the hedge fund will be the main investment structure is just emerging. Over the past few years, in our country, and indeed in the world in general, managers have been actively organizing their own investment hedge funds, leaving banks.

About three-quarters of the average hedge fund's capital is institutional funds, and investors are only top-tier investors. At the same time, you can become a co-owner of a portfolio of assets by investing an amount of $100 thousand or more.

If we talk about the peculiarities of the work of such companies in the Russian market, then Russian investment funds are represented mainly by mutual funds and OFBU. Private trust management (TT) can also be equated to a hedge fund.
The legal framework restricts the activities of companies, preventing the use of a large number of strategies for allocating funds. For this reason, every second Russian hedge fund is registered in an offshore zone.
It turns out that the government needs to improve legislation so that a domestic hedge fund is able to use all available investment opportunities and create a profit on the capital raised.

If you think about why CIS hedge funds do not please their investors at all, then we can identify two main reasons:

Every third (and even second) hedge fund operates on a core strategy that was effective during the last global financial crisis. At that time, assets were being purchased at low prices due to their depreciation. Then the hedge fund kept them on its balance sheet and sold them on the market at favorable financial times - when their prices increased significantly.

Nowadays, the crisis characteristic of Russia does not take on a global scale, so such a strategy does not work entirely correctly. It is necessary to focus on searching for market inefficiencies and develop infrastructure.

The current investment climate in the Russian Federation is extremely unfavorable. Fewer and fewer investors are coming from other countries. This is not surprising, because if the majority of Russian hedge funds have shown unprofitable results recently, the desire of citizens to find reliable companies is quite understandable.

However, if a number of measures are taken at the legislative level, the average Russian hedge fund can become an organization that consistently generates profit on the capital raised.

Hedge fund reviews

From what you read above, you should have understood that a hedge fund is the most popular investment instrument in the West. Fraudsters sometimes take advantage of this. The most famous case of fraud can be considered the Madoff hedge fund scam. His investment fund was known throughout high society. The minimum investment entry was several million dollars, and you also had to wait your turn. At first, Madoff's hedge fund actually worked and made a profit, but the 1995 crisis brought losses and Madoff decided to turn his hedge fund into a financial pyramid.

In the CIS, the most recent high-profile fraudulent scheme was MMSIS. The company hid behind trust management services in the Forex market, but, as it turned out, this company had nothing in common with the foreign exchange market. I recommend reading my review of the MMSIS company.

If you come across a hedge fund on the Internet with a minimum investment input of up to $50,000, then with a 95% probability this is a well-disguised hype. The site may have positive reviews about this “hedge fund” from supposedly satisfied investors, but we know that in the information age it is very easy to “draw” fake reviews about a hedge fund, or rather, reviews about hype.

What am I getting at? There are also non-trading risks involved in investing in hedge funds. In addition, a more or less reliable foreign hedge fund accepts investments from $100,000. This means that to form an investment portfolio, including hedge funds, you need to have about 500 thousand dollars in your pocket.

To summarize all of the above, investment funds are not only an opportunity to save your funds, but also to increase them, provided you choose the right fund.

In general terms, a hedge fund is not much different from a Pseudo Management Fund, and not every investor can verify the authenticity of registration documents. This means that there is a high probability that an inexperienced investor will step on a rake.

To form a well-diversified investment portfolio that would include several hedge funds, you need a capital of $500,000. Therefore, I believe that investing in foreign hedge funds is not relevant for CIS investors. For our realities, CIS investment funds such as trust management and PAMM accounts are more suitable. With these investment instruments you can build a portfolio even with a small capital. In fact, to start investing in PAMM accounts, $100-500 is enough.

And people who own a capital of $500,000 or more, I think, themselves understand that it will be much more profitable for them to invest money in an already promoted real business franchise rather than in a foreign hedge fund.

Every year I review HedgeCo.Net’s ranking of the best hedge funds and compile my own ranking of “Russian” hedge funds. But this year I will not make a rating of “Russian” hedge funds, since rating agencies in Russia do not provide information. And those funds that I reviewed in 2015 from open sources either left the market or stopped publishing information to open sources.

The range of the best profitability of the 2016 rating is much narrower than in 2015 and ranged from a minimum of 66.45% to a maximum of 145.59%. In 2015, the range was a minimum return of 58.52% and a maximum of 332.01%. There is no dominance of any particular strategy in either 2015 or 2016. In 2016, a fund with a Bitcoin strategy was included in the ranking of the best funds. None of the 2015 leaders remained among the 2016 leaders.

The average return of the best funds over three years remained approximately the same as last year, from 100% to 130%, which corresponds to 35-40% per annum. Sharpe ratio greater than 1. Assets under management from 6 to 17 million dollars.

As I wrote above, the most valuable funds are those that can consistently show stable returns above the market for several years. And if you look at the 2016 ranking, you will find that most of the hedge funds in the ranking are newbies, i.e. funds with a history of no more than 3 years. At first I concluded that beginners are lucky, but after looking at the ranking of the best hedge funds for 2015, I discovered that most of the funds there are older than 5 years. Let's see what happened to the leaders of 2015.

Traditionally, when making ratings, I make comparisons with our Eganov Asset Management Stocks & Derivatives Strategies fund and the benchmark S&P500 index. In 2016, the Eganov Asset Management Stock & Derivatives Strategies fund grew by 14.87%, and the S&P500 index by 9.54%. Compared to the benchmark, for the first time we showed a good result. But in order to enter the ranking of the best hedge funds and attract investor interest in the fund, it is necessary to show a return of 35-40% per annum for at least three years in a row and raise the Sharpe ratio to at least 1. Source

Such a financial structure as a hedge fund in the domestic economic understanding still remains a “dark horse”, the activities of which are practically unknown to the general public.

Some people perceive them as a way to secure their finances, others prefer not to get involved at all, however, if there is a structure, then it has some functions.

A hedge fund is a private investment partnership, the participants of which intend to maximize the income from the funds invested by investors in the face of existing risks or, conversely, reduce risks to achieve a set return. The purpose of the fund's activities is to obtain regular profits from the investments of depositors' funds, regardless of the market situation. Funds typically use both strategies, changing them as needed.

To achieve such goals, it is necessary to apply complex financial strategies, including, among other things, purchasing securities long or selling them short, leverage and others. The range of tools used is quite diverse and depends on each specific situation.

Investors' funds are predominantly invested in publicly traded securities, however, investments are not limited to this category; the source of future profit may be everything that can generate income:

• Earth;
• securities
• currency;
• commodity market and more.

At the same time, not every entrepreneur can use the properties of a hedge fund; only accredited or professional investors have access to the fund. Having at least $1 million in net worth.

Hedge funds in Russia

The domestic market is not very favorable to such financial institutions. Their profitability is often negative or very low. Hedge funds in Russia, for the most part, are represented by OFBUs, a significant part of which were formed back in 2008, immediately after the collapse of the stock exchange boom. The total number of such organizations in Russia is about 60, which is an order of magnitude less than in the United States.

This is largely due to the imperfection of the legislative framework. A significant part of the funds are registered offshore, which allows their participants to take advantage of the legislation of more liberal countries and protect their finances.

But even in such a difficult situation, there are funds with headquarters in Russia that receive stable profits at a high level.

• One of the market leaders VR Global Offshore Fund, whose profit for the year amounted to more than 30%. The company managed to achieve this level of profitability by blocking funds.
• In second place in terms of profitability is Diamond Age Atlas Fund, who earned a little more 20% total profit.
• On par with the previous fund, 20% brings profit and hedge fund Kvadrat Black.
• Follows him Copperstone Alpha Fund, earning 19,1% arrived.
• In fourth place is Burnem Asset Management, with a yield of 17%.

In general, these funds hold in their “reserves” about 80 percent of the assets available on the Russian investment market, and half of these funds belong to the most profitable player.

• Another popular hedge fund in Russia is the fund Extranet Investment. True, its popularity is rather negative. In 2015, the fund experienced certain disruptions, after which the personal accounts of investors were blocked. Today the site has been restored, but problems with payments, judging by the reviews, remain.

In addition to the “old guys,” young companies that adhere to active management strategies are also appearing on the domestic market. Having a short period of work, they cannot count on large investors who are ready to invest for a long period. But they have good intellectual resources, which, in conditions of fierce competition, will help them develop the right, partly even aggressive, strategy. The luckiest among them will then become leaders.

Hedge funds in the USA

American hedge funds traditionally occupy leading positions in the profitability rankings. This is easily explained by a long history of work and a well-thought-out legislative framework.

The largest American foundations manage funds amounting to about $1.5 trillion, while influencing the political and legislative activities of the state.

• Glenview Capital Opportunity, showing the profitability of the order 80 percent, in 2013, the fund's managers relied on reform of the healthcare system and bought up medical companies.

The top five largest American players also include:

• Millennium Partners L.P., which controls $180 billion in assets and relies on a combination of strategies to operate;
• Citadel Global Fixed Income Master Fund Ltd. works with instruments that have a fixed return;
• Black River Firv Opportunity Master Fund Ltd. deals with the supply of agricultural products, food products, financial and industrial results in all countries;
• Bluecrest Capital International Master Fund Limited, having investments in the debt and stock markets of America and England;
• Adage Capital Partners L.P., Based in Boston, it prefers trading stocks and bases its strategy on in-depth analysis of the intrinsic value of stocks.

Hedge funds in Europe

The European financial market, although large, is quite heterogeneous, and it can differ significantly in the western and eastern parts of the region. The largest and most profitable are British funds:

• ODEY EUROPEAN, profitability over 30%, assets of more than $2 billion;
• LANSDOWNE DEVELOPED MARKETS, holds about 9 billion, profitability is more 18% ;
• VR GLOBAL OFFSHORE, profitability over 30%, the amount of assets is about 2 billion;
• PELHAM LONG/SHORT, has assets worth 3.2 billion, profitability 19% ;
• THE CHILDREN'S INVESTMENT$7.3 billion, yield 30% .

There are also funds that have an international team, including representatives from the United States. For example, a hedge fund like Brevan Howard, comprised of five core founders whose company operates on conservative investments while delivering consistent results.

Watch also a video about hedge funds, their work scheme and differences from mutual funds:

Despite the fact that the history of hedge funds goes back decades, they appeared in Russia relatively recently - in 2008, and few are familiar with them.

In the European and American markets, this investment instrument is one of the most popular options. However, before placing your capital in a hedge fund for profit, you should understand the principles of its operation and understand the advantages and risks of this form of investment.

Hedge funds belong to the category of both the most modern and the riskiest forms of capital allocation. It must be said about such a pleasant moment as almost complete freedom from taxation; registration of hedge funds usually takes place in. State structures do not have the right to regulate or monitor the activities of these funds and influence them (however, this is rather a matter of time, since deoffshorization processes are underway in many countries, including this issue is acute in Russia).

The main difference and advantage of this highly profitable investment instrument is unlimited freedom in choosing an investment style. The trading strategy of hedge funds is especially effective in conditions of fluctuating or falling markets.

There are usually several basic hedge fund strategies, a few examples:

• Creating a portfolio of shares and adjusting it in order to obtain the highest portfolio value.
• Trading short positions, constantly moving for profit.
• Focus on problematic and undervalued securities. Shares of companies that are experiencing a crisis. This is a long-term investment horizon.

However, as practice shows, most funds do not limit themselves to one strategy or instrument. Setting high profits as their goal, many funds try to diversify their approaches by dividing funds into the most promising areas from their point of view.

Due to the deterioration of the investment climate, those wishing to increase their capital are cautious about placing funds, including scrupulously considering such financial instruments as hedge funds. In Russia, about 5-7 funds begin their activities every year, which, naturally, is very small, however, this unique financial instrument undoubtedly has a future, since it offers very high incomes and the widest range of financial management opportunities. This investment method is especially effective for those who invest with a longer financial horizon.

The investment threshold for such structures in Russia is usually about 3 million rubles, however, you can find more favorable conditions with a lower entry threshold. The most successful Russian funds are considered to be VR Global Offshore Fund, Burnem Asset Management, Copperstone Alpha Fund, Diamond Age Atlas Fund, ArbatGlobal Funds.

Hedge fund - what is it in simple words? A private investment fund that:

1. Controlled professionals in the interests of investors.
2. Valid according to aggressive investment strategies.
3. Is not limited in choosing investment methods, actively uses derivative hedging instruments (derivatives) and their combinations.
4. Goal: focuses on minimizing risk at a level of profitability strictly set by investors or maximizing profit at a given level of risk.

Key principles:

1. The principle of protecting the interests of investors.
2. The principle of equity participation or trust management. The latter means that by investing in a hedge fund, you transfer your money to professional managers and become a beneficiary.
3. The principle of free and unlimited control. Based on minimal government regulation and control. Thus, in the USA, even the Securities and Exchange Commission does not interfere in the work of the organization. On the one hand, the principle guarantees the maximum degree of freedom. On the other hand, the investor must be able to independently protect his interests (for example, in the event of a trader’s fraud).

As a result, a hedge fund has the following features:

• greater flexibility and the ability to follow any investment strategy, including aggressive;
• a large selection of potentially profitable investment assets with limited availability for other investors: securities of foreign issuers, precious metals, exchange derivatives (futures, options);
• unlimited leverage;
• the ability to use the most modern financial technologies (fintech, blockchain);
• limited participation rights and strict requirements for investors - the funds are intended only for professional investors.

Important! In international practice, such an investor must have the status of “qualified, accredited” and have significant capital. For example, in the USA, the minimum investment size for individual private investors is $5 million, for corporate investors - $25 million. Offshore structures are simpler - the entry threshold is from $100 thousand.

A qualified individual investor in Russia must meet one of the following requirements:

• owns cash, cash equivalents, securities and derivatives in the amount of RUB 6 million or more;
• has three years of experience in an organization that made transactions on the securities market;
• over the last year, conducted transactions worth 6 million rubles, making at least 10 transactions quarterly;
• has a higher education in the field of activities in the securities market.

To finally determine the specifics of hedge funds, let’s look at their differences from classic mutual funds.

Criterion	Hedge fund
State control	Strict rules of the institution. Activities are poorly regulated	Strict control and regulation of activities
Entry threshold	From 100 thousand dollars	From 1 thousand rubles.
Investor requirements	Qualified/Accredited
Investment assets	Any securities Property assets Precious stones and metals Derivatives: forwards, futures, options	Nationally traded securities Property assets
Investment strategies	Long and short positions	Long positions
Fund remuneration / investor costs	Commissions on the value of the share (1–2%) plus a percentage of profit (20–25%)	Percentage of share value (2–5%)
Exit method	The shares are not traded on the market and can be transferred to a third party only with notification of the management company (usually within the fund).	The units are traded on the secondary market.

Important! The popularity of this method of investing abroad is due to the following fact: provided that a competent strategy is implemented, the hedge fund will bring profit to investors not only in a growing market, but also in a falling one.

Peace Funds

The first ever hedge fund - A.W. Jones & Co. Year of registration: 1949. Founder: Alfred Jones.

He made long-term investments in shares of promising companies while simultaneously opening short positions to sell securities that did not live up to expectations. Over 10 years, the value of investments increased 7 times, which significantly exceeded the profitability of any traditional mutual fund. The experience was considered successful, and in 1968, 140 organizations were already registered in the United States.

The global stock market boom occurred in the mid-80s, when a new type of strategic funds emerged that formed their portfolio based on the most accurate tools for forecasting economic and political trends.

Interesting fact: The most famous among the general public is George Soros's Quantum fund, which rose on the devaluation of the pound sterling after Black Wednesday in 1992 with a profit of $1 billion.

Today, more than 12 thousand hedge funds with assets of over $2 trillion have been founded in the world. Most of them are registered in the UK (London), the USA and offshore zones. Below is a list of the largest management companies.

A large portfolio is a relative guarantee of reliability and greater maneuverability. However, the size of assets and profitability, as a rule, are not interrelated. This is confirmed by the fact that the profitability ranking is often dominated by young structures with a small portfolio. A key feature of hedge funds is the fact that their returns are volatile. Thus, the leaders of 2015 according to this criterion have today lost their positions. The returns of the best funds on the planet in 2016 have been analyzed In this article.

Kinds

The IMF classification identifies three types of structures:

1. Relative Value Funds- operating in a specific market segment using classical hedging strategies, relying on the duality of prices of the underlying asset in the spot and futures markets.
2. Macro funds- prefer to invest in the assets of a specific country, based on the forecast of its political and economic development as a whole.
3. Global funds- play on the markets of all countries based on the investment attractiveness of securities of specific issuers.

Operating procedure

How do hedge funds work? A typical structure of its environment looks like this.

Investors- source of funds.

Board of Directors- a link between investors and managers. Supervises the activities of management companies and companies providing services, resolves controversial issues, and determines personnel policies.

Management company (MC)- attracts investors, determines investment strategies, and provides general management. The Criminal Code includes:

• managing partners;
• analysts - the quality of predictive models for the development of the economic and political situation depends on them;
• traders are the “core” of the fund; the profitability of investors depends on the level of these people.

Administrator- conducts an independent assessment of the value of net assets (risk minimization), in some cases prepares accounting and external reporting for investors, pays bills, deals with issues of profit distribution, subscription and redemption of shares.

Primary broker- provides operational support and technical support for transactions in national and foreign markets. Provides a range of financial services (clearing, depository, etc.). It must ensure the most complete coverage of the markets where the management company operates, so a large bank (Merrill Lynch, Goldman Sachs, Morgan Stanley) often acts as a primary broker.

Bank guarantor- ensures the integrity of deposits, generates reports on transactions on the account, and in some cases checks the activities of the management company. In most cases, a large bank with an unshakable reputation.

External auditor- checks the reporting for its reliability and compliance with accounting and legal standards. An auditor is a guarantor of reputation, which, given the volume of investments, is of paramount importance. Therefore, they try not to skimp on it and attract well-known companies from the TOP 10.

Legal advisor(internal or external) - ensures obtaining a license, manages all issues of concluding contracts in different jurisdictions.

The structure considered allows for numerous variations in the direction of simplification or complexity.

Strategies

Even a small hedge fund in the USA brings its investors 10–20% per annum (in foreign currency, of course). The profitability of top organizations exceeds 100%. How do hedge funds make money?

A variety of investment strategies, methods and methods of hedging can be conditionally combined into several groups.

Fair Value or long position- long-term investments in undervalued or discounted securities. Let's remember from articles "Promotions", What underrated A share is considered a security if its estimated fair value exceeds its market value. This is the main strategy of any long-term portfolio and venture investors. Reliably estimating fair value is not an easy task, which is why hedge funds require the services of professional appraisers.

Short position- a trader sells short positions, making money on a falling market.

Example 1. A trader borrows 1000 shares of company A from a broker. Price: $100. Broker's commission: $1 thousand. Debt: $101 thousand. The trader sells securities on the market. A month later, the spot price dropped by 25% to $75. The fund buys the shares, returns them to the broker, and makes a profit of $24,000.

Long/Short position- the most popular hedging strategy, usually applied to half of the assets. It involves the acquisition of undervalued assets (long position) and the sale of overvalued ones (short position). The strategy can be diversified, but most often the fund uses it in relation to firms competing in the same industry.

Example 2. A trader uses his own funds to buy 1,000 undervalued shares of automaker A at a price of $100. Broker's commission: $1,000. To hedge risks, under the same conditions, the trader opens a short position with the broker for 100 shares of automaker B. If the trader is not mistaken in the degree of undervaluation of the shares of manufacturer A, then:

• In a growing market, for example, shares of company A will increase by 30%, company B - by 20%. Profit on a long position: 130 – 100 – 1 = 29 thousand dollars. Loss on a short position: 100 – 120 - 1 = 21 thousand dollars. Total profit: 29 – 21 = 8 thousand dollars.
• In a falling market, for example, shares of company A will fall by 20%, company B - by 30%. Loss on a long position: 100 – 120 – 1 = 21 thousand dollars Profit on a short position: 130 – 100 – 1 = 29 thousand dollars Total profit: 29 – 21 = 8 thousand dollars

Thus, the strategy will allow you to make money both when the market rises and when it falls. A loss is possible only if the change in the price of company B’s shares exceeds company A’s absolute value, which signals the trader’s incorrect assumptions.

Market Neutral Arbitrage- the trader makes money on the difference in prices (spot and futures) of the underlying asset on different exchanges.

Event Driven- the trader promptly reacts to short-term unfair changes in the price of shares of a particular issuer caused by significant events (acquisition, merger, reorganization, etc.). The essence of the strategy: buy or sell securities in time before the price levels off. The strategy is most effective if managers have insider information or hold leadership positions in the investee.

Distressed Securities- acquisition at a large discount of the assets and liabilities of a company on the verge of restructuring or bankruptcy. The essence of the strategy: hope for the revival of the company as a result of internal changes and capital injections.

Global Macro- a hedging method that involves profiting from major macroeconomic and political changes in specific countries. Bonds, interest rates and currency pairs are used as the underlying asset (hedging currency risks).

Foundations in Russia

The Achilles heel of the Russian market is its youth. The existence of investment funds at the legislative level was enshrined in 2008 by the “Regulations on Investment Funds”. Russian hedge funds are recognized as a separate category of mutual funds.

Opening a hedge fund in our country is problematic due to complex registration rules - according to the website investfunds.ru, only 24 organizations are officially registered.

Russian structures are characterized by features inherent in a young, undeveloped market:

• increased degree of secrecy of large, well-known players;
• high proportion of fraudsters;
• lack of trust in managers;
• a pronounced shortage of investors.
• problems with covering operating costs and insufficient funding for research and market analysis;
• problems with qualified personnel, increased demand for good traders.

Among the Russian organizations the following can be distinguished:

• Management Company: Alfa Capital. "Private Investment Fund". Year of foundation: 2009. It is closed. Later, under the auspices of the same management company, the “Corporate Investment Fund” was created.
• UK: "Europe Finance". Dominum Russia Global Foundation. Year founded: 2009. DRG uses the popular Western managed futures strategy.
• Founder: FC Otkritie. Management Company "Meriden IFM". Open strategic fund "Otkririe Hedge Fund". Registered in 2007 in Andorra. Focused on working with Russian assets based on its own multi-strategies.
• Of particular interest are also organizations founded by PJSC Sberbank and VTB, as well as: VR Global Offshore Fund, Diamond Age Atlas Fund, Copperstone Alpha Fund, Burnem Asset Management.

In addition to “pure” hedge funds in Russia, one can distinguish their closest analogues in terms of their economic essence: trustees and general banking management funds (MFBU).

The bank acts as the management company of the OFBU, the license is issued by the Central Bank of the Russian Federation. The property of the OFBU is completely separate from the property of the bank. Such an organization of activities provides a number of advantages:

1. Possibility of effective use of banking infrastructure: depository, banking audit and financial control, branch network. This reduces the investor's commission costs.
2. Good reliability and transparency. A separate correspondent account for depositors in a bank of Russia and a separate foreign currency account in a bank designated by the Central Bank of the Russian Federation. In the event of a bank's default, its depositors have no claim to the fund's property.

Participation procedure: the investor invests funds in exchange for a certificate of equity participation, which is not a security, but gives the right to part of the property. Unlike securities (shares), the certificate is not traded on the market, but can be bequeathed or simply re-registered to a third party (based on an application to the bank).

Bank requirements:

• "life" period - at least 1 year;
• capital amount - from 100 million rubles;
• condition rating - “financially stable”;
• No more than 15% of the portfolio can be invested in the securities of one issuer (except for government securities).

Instead of a conclusion

Summing up the preliminary results, we will definitely focus on the disadvantages of hedge funds:

• limited entry options - major structures are closed;
• high entry threshold and strict requirements for investors;
• diversion of funds for a long period of time;
• limited exit options;
• limited capabilities for monitoring and controlling the activities of management companies;
• high probability of fraud;
• high risks - performance results are poorly predictable and volatile.

On the other hand, hedge funds are reliable (the large size of assets plays an important role) and are, in fact, the only reasonable way to invest in the pursuit of excess income. Analysis of profitability and recommendations for choosing a fund will be discussed in the article investing in hedge funds.

Useful video