Hedge fund investing is a relatively new phenomenon in Sweden. The first Swedish hedge fund was started in 1996. This new financial sector has since showed a steady growth.Due to the novelty of hedge fund phenomena, it is right to ask whether the investors are prepared for this kind of investments; how they choose their hedge funds investments and whether they have adequate knowledge in the field. This thesis provides a mapping of the investors’ behavior regarding hedge fund investments. We have concluded that Swedish hedge fund investors have a limited basis of knowledge required to fully utilize hedge funds in their portfolios.
Contents
1 Introduction
1.1 Background
1.2 Problem Discussion
1.3 Purpose
1.4 Delimitation
1.5 Perspective and Contribution
1.6 Definitions
2 Frame of References
2.1 Hedge fund history
2.2 Advantages with hedge funds over mutual funds
2.2.1 High Risk Adjusted Returns
2.2.2 Diversification
2.3 Disadvantages with hedge funds over mutual funds
2.3.1 High fees
2.3.2 Low transparency
2.3.3 Limited liquidity
2.4 Hedge fund styles
2.5 Measuring returns
2.6 Measuring risk
2.6.1 Standard deviation and downside deviation
2.6.2 Skewness and kurtosis
2.6.3 Value at risk
2.6.4 Drawdown statistics
2.6.5 Covariance and correlation
2.6.6 Beta and market risk
2.7 Measuring manager performance
2.7.1 Percentage of winning months
2.7.2 Benchmarking statistics
2.7.3 Sharpe ratio
2.7.4 Sortino ratio
2.7.5 Jensen Alpha
2.7.6 Treynor ratio
2.7.7 Remarks about performance statistics
3 Method
3.1 Choice of method
3.2 Data collection
3.2.1 Secondary Data Collection
3.2.2 Qualitative Preliminary Study
3.2.3 Quantitative Main Study
3.2.4 Processing and Analyzing the Data
3.3 Critique of the method
3.3.1 Not enough sources to be objective in the theory
3.3.2 Too small sample of the professionals
3.3.3 Only Using the Trader Invest Europe AB database
3.4 Non-Response Analysis
3.5 Validity
3.6 Reliability
4 Empirical findings and analysis
4.1 Empirical research, professionals
4.2 Empirical research, investors
4.2.1 The reasons behind the hedge fund investments
4.2.2 How the investors measure the risks of hedge funds
4.2.3 How the investors evaluate hedge funds
5 Conclusions
6 Final discussion and recommendations
6.1 Further discussion
6.2 Recommendations
6.3 Validity
6.3.1 Inner Validity
6.3.2 Outer Validity
6.4 Reliability
6.4.1 Qualitative Preliminary Study
6.4.2 Quantitative Main Study
6.5 Suggestions for further studies
Appendix
Author: Rubil, Goran,Sprycha, Magnus
Source: Jönköping University
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