Joseph G.Nicholas – Market Neutral Investing

Description

In right this moment’s unstable markets, managing threat is extra essential than ever. Investors are searching for draw back safety whereas sustaining good returns–and market-neutral investing has develop into one of many hottest strategies to satisfy that want. In this e-book, trade professional Joseph G. Nicholas explores new approaches to return enhancement and threat discount via market-neutral methods.

Market-neutral investments are enticing as a result of they’ve produced considerably higher risk-adjusted returns than the market in the course of the previous ten years. The complexities created by the mix of longs, shorts, and leverage, nonetheless, make market-neutral methods very totally different from typical investments. Getting to understand how these methods work entails breaking them down into their primary parts after which inspecting how these components work together as a system with particular habits traits. This e-book examines eight key methods, revealing the supply of their previous returns and giving the investor instruments with which to measure the potential of repeat efficiency.
Nicholas attracts extensively on his firm’s database of over three thousand hedge funds and from the every day portfolio evaluation carried out for hedge fund portfolios. He has additionally integrated in depth enter and precise funding examples offered by managers and practitioners of every of the methods mentioned within the e-book.

This is the one e-book that appears at market-neutral methods head-on, assessing people who have labored and a few notable ones which have failed–and explaining why. Clear, insightful, and illustrated with quite a few charts and graphs,Market-Neutral Investing is a useful information for skilled traders.

Table of Contents

Acknowledgments.
Foreword.
Introduction.

Chapter 1: Investing in Relationships.
What Is Market Neutral?
Basic Concepts.
Relationship Investing.
Understanding Market-Neutral Approaches.

Chapter 2: Developments within the Hedge Fund Industry.
Hedge Fund Industry Assets.
Hedge Fund Investors.
Hedge Fund Strategies.

Chapter 3: Making an Investment in Market-Neutral Strategies.
Linear Analysis of Returns.
Reducing Exposure to Risk.
Market-Neutral and Hedged Strategies.
Convertible Arbitrage.
Fixed-Income Arbitrage.
Mortgage-Backed Securities Arbitrage.
Merger Arbitrage.
Equity Hedge.
Equity Market-Neutral and Statistical Arbitrage.
Relative Value Arbitrage.
Achieving Superior Risk-Adjusted Returns.
Assessing the Risks.
Transparency.
Focusing on the Underlying Strategies.

Chapter 4: Convertible Arbitrage.
Convertible Bond Valuation.
Statistical Advantage.
Convertible Valuation Components.
Convertible Arbitrage Approaches.
Quantitative Screens.
Kinds of Hedges.
Setting Up a Market-Neutral Hedge.
Setting up a Bullish Hedge.
Setting up a Bearish Hedge.
Risks and Risk Control.
Fundamental Analysis.
Hedge Analysis.
Portfolio Construction.
Liquidity.
Leverage.
Source of Return.
Convertible Bond Market History.
Recent Growth and Developments in Convertible Arbitrage.
Performance in Adverse Market Conditions.
Historical Examples.

Chapter 5: Fixed-Income Arbitrage.
Fixed-Income Arbitrage Approaches.
Basis Trades.
Asset Swaps.
TED Spreads.
Yield Curve Arbitrage.
Relative Value Trades.
Risks and Risk Control.
Risks.
Measuring and Controlling Interest Rate Risk.
Sources of Return.
Financing.
Repurchase Agreements.
Technology.
Liquidity.
Events.
Manager Skill and Hard Work.
Growth and Recent Developments in Fixed-Income Arbitrage.

Chapter 6: Mortgage-Backed Securities Arbitrage.
Mortgage-Backed Structures or Sectors.
(Types of MBS Instruments).
Mortgage-Backed Securities’ Evolution.
Pass-Throughs.
Basic Collateralized Mortgage Obligations (CMOs).
CMO Tranches.
Valuation Methods.
Option-Adjusted Spreads.
Information Systems.
Risks and Risk Control.
Duration.
Effective and Partial Duration.
Parallel and Rotational Shifts of the Yield Curve.
Convexity.
Prepayment Duration.
Leverage.
Pricing.
Source of Return.
Valuation Models.
Leverage.
Liquidity.
Financing.
Hedging Techniques.
Recent Developments in MBS Arbitrage.

Chapter 7: Merger Arbitrage.
Merger Arbitrage Approaches.
Cash Mergers or Tender Offers.
Stock Swap Mergers.
Stock Swap Mergers with a Collar.
Multiple Bidder Situations.
Leveraged Buyouts and Hostile Takeovers.
Risks.
Event Risk.
Deal Flow.
Liquidity.
Risk Control.
Diversification.
Leverage.
Source of Return.
Growth and Recent Developments in.
Merger Arbitrage.
Deal Flow and Other Factors Affecting Volume.
Stress Period: The Third Quarter of 1998.
Returns.

Chapter 8: Equity Hedge.
Investment Themes and Fundamental Analysis.
Investment Themes.
Fundamental Analysis.
Equity Hedge Approaches.
Quantitative vs. Qualitative Mix.
Universe of Stocks.
Style.
Liquidity.
Net Market Exposure.
Research.
Leverage.
Risks and Risk Control.
Stock-Picking Risk.
Market Risk.
Universe of Stocks.
Diversification.
Sell Disciplines.
Leverage.
Source of Return.
Recent Growth and Developments in Equity Hedge Investing.

Chapter 9: Equity Market-Neutral and Statistical Arbitrage.
Equity Market-Neutral Approaches.
Initial Screen: Universe of Investable Stocks.
Stock Selection.
Mean Reversion-Based Approaches.
Risks and Risk Control.
Portfolio Construction and Optimization.
Manager Styles-Putting It All Together.
Source of Return.
Recent Growth and Developments in Equity Market-Neutral Investing.

Chapter 10: Relative Value Arbitrage.
Relative Value Arbitrage Approaches.
Convertible Arbitrage.
Merger Arbitrage.
Equity Statistical Arbitrage.
Pairs Trading.
Fixed-Income Arbitrage.
Options and Warrants Trading.
Capital Structure Arbitrage.
Regulation D (Structured Discount Convertible) Arbitrage.
Risks and Risk Control.
Strategy Mix.
Strategy Weightings.
Source of Return.
Growth and Recent Developments in Relative Value Arbitrage.

Afterword.
Glossary.
Index.

Author Information

Joseph G. Nicholas, JD is founder and chairman of HFR Group, LLC, which incorporates HFR Asset Management, LLC, a fund-of-funds administration firm and Hedge Fund Research, Inc., a number one provider of hedge fund knowledge. Author ofInvesting in Hedge Funds and Hedge Fund of Funds Investing, he’s a frequent lecturer and media professional on subjects referring to various investments.

Reviews

“Market-neutral investing . . . is the quickest rising section throughout the world hedge funds trade. Nicholas provides . . . precious insights into eight particular market-neutral methods which might be in rising demand by each institutional and personal traders. . . . This is a milestone publication, which broadens our data and funding horizons–a useful reference instrument for world portfolio managers, the worldwide investor group, and trade service suppliers.”
– Sohail Jaffer
Chairman, Alternative Investment Management Association (AIMA)