Hedge Fund Risk Analysis

Risk has always been something that people associate with hedge funds. Clearly there is risk attached to any investment product and hedge funds are no worse or better than most other assets. This is the Hedge Fund Risk course in the market that will help you understand the risks inherrent in using hedge funds and will provide practical strategies to reduce your exposure.

Course Highlights

Attend this course and learn:

the differences between hedge fund investment risk and traditional investment risk
the key risk implications resulting from the credit crunch
how to use diversification as a risk management tool
why many funds need to overhaul their approaches to risk management dramatically
the real issues behind some of the recent hedge fund blow-ups and what you can learn from them
how to understand how risk is being reported by hedge funds
practical approaches for effective risk due diligence
the importance of risk managing the hedge fund operations
how to cope with limited transparency investing and infrequent position transparency

For details of the course trainer, please download the course brochure

Booking Information

Dates	Prices	Book This Course	Discount
13 - 14 Oct 2010	£ 1999		-

Course Programme

Hedge Fund Risk: Lessons from the Market Correction, 2008 & 2009

How risky have hedge funds been in 2009
Major loss review in the hedge fund industry
The credit crunch and market correction
Hedge fund risk prospective 2010

Hedge Fund Investment Risk as Compared to Traditional Investment Risk

How hedge fund risk differs from risk in traditional investment strategies
Market risk, volatility, specifics of hedge fund non linear return patterns
Hedge fund return distributions and return tail analysis
Special hedge fund risk considerations: leverage, concentration, and illiquidity concerns

Putting Leverage into Perspective

Understanding and measuring levels of leverage
Different risk levels of leveraged stocks, bonds and derivatives
Leveraging credit risk and rating agency concerns
Dissecting leveraged financial engineering

Illiquid Investments & Investment Return Patterns

Volatility and illiquidity
Valuation problematics, mark to market and discounts for illiquidity
The liquidity squeeze: tightening during financial market distress

Understanding Portfolio Concentration

Benchmark and absolute returns vs. tracking error
Constraints on concentration
Measuring concentration in hedge funds

Exploring other Non-traditional Risk Factors & Hedge Fund Trading

Sources of hedge fund returns
Sources of hedge fund risk
Alternative Beta and alternative Alpha return streams

Risk Considerations of Different Hedge Fund Strategies:

Long short and market directional strategies
Emerging market hedge funds and hedging
Event driven hedge funds and event risk
Credit hedge funds and illiquidity risk
Arbitrage and pair trading risks
Market neutrality hedge fund trading and factor risk
Derivative-based hedge fund trading strategies and basis risk

Optionality and Asymmetric Payoffs in Hedge Fund Return Patterns

Asymmetric payoff structures and downside risk protection
Understanding and fleeing from short optionality payoff structures
Famous short optionality blow-ups
Long optionality payoffs and investment loss considerations

Hedge Fund Risk Measures & Methods

Hedge funds and mean variance optimisation models
Non traditional risk and multi-factor models
Market and credit risk impacting hedge fund investment strategies
Confidence levels and extended tail loss
VAR and Monte Carlo simulations
Stress testing including key drivers and factor analysis
Analysis of higher movements: reading Kurtosis and Skew
Sharpe ratio shortfalls
Downside deviations measurements and drawdown analysis
Other hedge fund risk measures

EXERCISE: Hedge fund risk statistics calculations

EXERCISE: Group review of a hedge fund risk report

The Hedge Fund Risk Management Professional

The "ideal" risk manager in a hedge fund
Reporting roles of the risk manager
Risk measurement vs risk management
The risks that a risk management professional can mitigate

The Risk Due Diligence Process

Operational risk and investment risk divide
Current and best practices in the industry
What can go wrong in a due diligence process
After the fact and blow-up avoidance
The comprehensive due diligence process

Operational Risk Concerns: Managing Risk in Hedge Fund Operations

Operational risk management of hedge funds
Main causes of fund failures
Data from previous fund failures
The human factor, fraud, misrepresentation, and other disasters
The process factor: running small entrepreneurial businesses correctly
Quantifying operational risk management practices and the operational due diligence manager
Reviewing fund systems and procedures

Organisational issues and processes

Operational risk ratings

Moodys
S&P
Other operational risk rating systems

CASE STUDY: Reviewing the operational risk report of a Standard and Poor's 500 five star rated fund deal in structured credit products during a liquidity crisis: events in the Subprime in 2008 and 2009.

Portfolio Diversification as a Risk Management Tool

How multi-strategy hedge funds and fund of funds effect risk
Constructing and risk managing a fund of fund or a portfolio of hedge funds
Correlation roll patterns in multi-managers
Risk drivers in funds of funds
Underlying investment transparency
Using multifactor models to risk manage a fund of hedge fund

Hedge Fund Position Level Transparency

Managed account investing or position data from managers, prime brokers, or counterparties
Limits to risk controls via transparency

Limited Transparency Investing & Infrequent Position Transparency

The multi-factor modelling and returns-based analysis
Shortfalls of multifactor modelling
Which factors to use and factor evaluation
Factor risk decomposition
Multifactor models used for hedge fund trading: the breakdown of the quantitative hedge funds in August 2007

Risk Management and Outside Service Providers: Administrators, Auditors and Independent Valuations

Varying levels of service from administrators and auditors
Valuation of hard to value securities
Model valuation review and problematics
Marking to model and marketing to market and model risk
Auditing hard to value funds and hedge fund risk

Mitigating Hedge Fund Risk: The Blow-Up Studies of 2008 & 2009

Some of the most recent blow-ups explained
If someone steals our money
Market Illiquidity and blow-ups
Explaining blow-ups to investors
Mitigating and avoiding blow-up risk

Investors Concerns for Mitigating Hedge Fund Blow-Up Risks

An industry standard or best practices solution
Institutionalising the hedge fund risk management process
Risk management concerns of the largest investors

Conclusion: Hedge Fund Risk Going Forward

The new paradigm in risk management
Lessons learned from the crisis
Hedge fund risk in declining markets
Hedge Fund Risk evolution five years on: better or worse
Final thoughts on selecting well risk-managed hedge funds