Ein Glossar für Experten

A

American Stock Exchange (AMEX):                                                                         

The country's second-largest stock exchange. AMEX is based in New York and generally uses more lenient rules for listing stocks than the New York Stock Exchange (NYSE). Generally there are smaller companies listed on this exchange. In 1998, the Nasdaq purchased AMEX, but the companies continue to operate separately.

B

Buyout Fund

This is a Private equity fund whose strategy is to acquire other businesses. Typically the funds are locked up for a longer period of time (five to ten years).

C

Convertible Arbitrage

Convertible Arbitrage managers seek to profit from investments in convertible securities employing both single security and portfolio hedging strategies. Managers typically build long positions of convertible and other equity hybrid securities and then hedge the equity component of the long securities positions by shorting the underlying stock or options of that company. Interest rate, volatility and credit hedges may also be employed. Hedge ratios need to be adjusted as markets move and positions are typically designed with the objective of creating profit opportunities irrespective of market moves.

Compliance

Companies are required to be in accordance

The state of being in accordance with the relevant national or regional authorities and their requirements. In the context of financial services, the most important compliance rules come from the Securities and Exchange Commission (US) or the Financial Services Authority (UK). Most large financial services companies have compliance teams whose role is to take an independent stance in making sure that the company is complying with the relevant rules and regulations.

Compliance Management

The process of collection and evaluation of fund, client and investor data, including self-monitoring reports and verification to show whether the fund's operations are in accordance with the compliance regulations issued by the Securities and Exchange Commission (US) or the Financial Services Authority (UK).

CRM

CRM stands for Customer Relationship Management or Client Relationship Management. CRM is a software solutions that help businesses manage customer relationships in an organized way. An example of a CRM would be a system containing detailed investor, fund, and client information that a fund's deal and/or investor relations teams can reference in order to maintain client relations, inform investors of fund performance, raise funds, manage the deal pipeline, etc.

CTA:

The CTA - Systematic Trading - strategy refers to the active trading of exchange traded futures and options on a levered basis. The goal is to profit solely from market price changes. The underlying markets may include energy, interest rates, currencies, metals, energy, agriculture, indices, metals, energy, agriculture and others. Systematic trading strategies enable the investor to participate in price action of the market while being immune to "psychological" factors such as crowd behaviour.

D

Dedicated Short Bias

The manager using Dedicated Short Bias seeks to profit from maintaining overall net short portfolios of long and short equities. Company research typically forms the driver of core alpha generation of a short bias manager. Subsequently a focus on companies with weak cash flow generation is common. Risk management often offsets long positions and stop-loss strategies. Risk management is challenging since money losing short positions grow in size

Deal Flow

This explains the number of potential investments that a fund reviews at any given period.

Distressed Debt

Fund managers invest in trade claims , debt and equity of companies in financial distress or bankruptcy. Managers may take arbitrage positions within a company's capital structure, typically by purchasing a senior debt tier and short-selling common stock hoping to realizing returns from shifts in the spread between the two tiers. Securities of companies in need of legal action or restructuring to revive financial stability typically trade at substantial discounts to par value - hence this attracts investments as managers perceive a turn-around when success materializes.

Distressed/High Yield

 Fund managers in this non-traditional strategy invest in the debt, equity or trade claims of companies in financial distress or already in default. The securities of companies in distressed or defaulted situations typically trade at substantial discounts to par value due to difficulties in analyzing a proper value for such securities, or simply an inability on behalf of traditional investors to accurately value such claims or direct their legal interests during restructuring proceedings.

E

Emerging Markets strategies

Emerging Markets managers seek to profit from investments in currencies, debt instruments, equities and other instruments of "emerging" markets countries (typically measured by GDP per capita). Emerging Markets include countries in Latin America, Eastern Europe, Africa, and Asia. There are a number of sub-sectors, including arbitrage, credit and event driven, fixed income bias, and equity bias.

Equity Hedged strategies

The Equity Hedged strategy refers mainly to managers with the following criteria: highly research oriented, long and short trading style, seeking out market niches in the equity market, or actively trading the portfolio based upon market conditions. Managers differ significantly in use of leverage and hedging techniques. In this category the market exposure is low and yet it is not a market neutral strategy.

Equity Market Neutral strategies

Equity Market Neutral managers seek to profit from exploiting pricing relationships between different equities or related securities while typically hedging exposure to overall equity market moves. There are a number of sub-sectors including statistical arbitrage, quantitative long/short, fundamental long/short and index arbitrage. Managers often apply leverage to enhance returns.

Event Driven strategies

The Event Driven strategy concentrates on companies that are, or may be subject to corporate events such as restructurings, takeovers, mergers, liquidations, bankruptcies or other special situations. Event Driven strategies allow an investor to exploit catalyst driven inefficiencies.

Event Driven Multi-Strategies

This subset refers to hedge funds that draw upon multiple themes, including risk arbitrage, distressed securities, and occasionally others such as investments in micro and small capitalization public companies that are raising money in private capital markets. Fund managers often shift assets between strategies in response to market opportunities.

F

Family Office Model

The organization that is created, often after the sale of a family business or realization of significant liquidity, to support the financial needs for a specific family's high net-worth group. High net-worth families use family offices for a range of services, which include investment management, financial and estate planning, and services related to philanthropy, personal banking, family governance, trusts/administration and tax planning.

Fixed Income Arbitrage strategies

Fixed Income Arbitrage managers seek to profit from relationships between different fixed income securities; leveraging long and short positions in securities that are related either mathematically or economically. Many managers trade globally with a goal of generating steady returns with low volatility. The sector includes yield curve relative value trading involving interest rate swaps, government securities and futures; volatility trading involving options; and mortgage-backed securities arbitrage (the mortgage-backed market is primarily US-based, over-the-counter, and particularly complex).

Fund

A vehicle for enabling pooled investment by a number of investors in equity and equity-related securities of companies (investee companies). These are generally private companies whose shares are not quoted on any stock exchange. The fund can take the form either of a company or of an unincorporated arrangement such as a limited partnership. A fund may decide on a legislative home (registration) toachieve a competitive advantage.

Fund Manager Monitoring

Encompasses the supervising activities and appropriately reporting in fund of funds or institutional investor structures. The process provides an ongoing verification of progress toward the achievement of fund objectives and financial goals.

Fund of Funds (FoF)

These funds hold a portfolio of other investment funds rather than investing directly in shares, bonds, or other securities. Different types of fund of funds  invest in a different type of collective investment schemes. Hedge fund of funds (HFOF) and private equity fund of funds are two different sets of FoF..

Fund of Hedge Funds (FOHF)

A hedge fund invests in a minimum of two other hedge funds. Just as a hedge fund invests in a number of different securities, a fund of funds (FoF) holds shares of many different hedge funds. The purpose of FOHF is to achieve an even greater diversification than traditional hedge funds.

Fund of Private Equity Funds

Since a private equity fund makes direct investments in companies, this FoF is investing into a number of other private equity fund managers, who in turn invest the capital directly. Funds of funds often give individual limited partners access to funds from which they would otherwise be excluded. Also, the risk to limited partners is reduced by spreading the capital more widely.

G

Global Macro strategies

Global Macro managers apply long and short positions in any of the world's major capital markets (fixed income, currency, equity, commodity). It is the broadest strategy in the hedge fund universe. Managers typically consider both economic adjustment themes as well as shorter-term technical conditions when choosing trading positions that anticipate market movements. Managers often employ a "top-down" global approach and may invest in multiple markets in anticipation of expected market movements. These movements may result from forecasted shifts in world economies, political changes or global supply and demand imbalances. Many Global Macro managers primarily trade in more liquid instruments in order to keep their trading activities flexible.

Gatekeeper

A specialist adviser who assists institutional investors in their private equity allocation decisions. Institutional investors with little experience in the asset class or those with limited resources often use gatekeepers to help manage their private equity allocation. Gatekeepers usually offer tailored services according to their clients' needs, including private equity fund sourcing and due diligence through to complete discretionary mandates. Most gatekeepers also manage funds of funds.

General Partner

A partner who has unlimited personal liability for the debts and obligations of the limited partnership and the right to participate in its management.

H

Hedge Funds:

Hedge Funds are investment vehicles of privately managed capital which are active in the global capital markets, are oriented towards absolute returns. Hedge funds use a variety of investment techniques, are lightly regulated and often accept only a very limited number of investors so as to ensure that their investment strategy remains flexible. Hedge funds are categorized not only according to the asset classes in which they invest (equities or bonds) or their geographic or thematic orientation, but also in terms of their strategies (e.g. arbitrage, macro, event-driven or opportunistic).

Hedge Fund Due Diligence

A term assigned to investigating a hedge fund in detail. This due diligence delves into more than just historic returns and their volatilities, but wants to understand a fund's strategy and its risks, the fund itself, and the fund manager, and it does so with quantitative and qualitative research. Quantitative due diligence concentrates mainly on the strategy itself, while Qualitative due diligence concerns itself with characteristics of the fund and the fund manager.

I

Institutional Investor

An investor, such as an investment company, mutual fund, insurance company, pension fund, or an endowment fund, which generally has substantial assets and experience in investments. In many countries, institutional investors are not protected as fully by securities laws because it is assumed that they are more knowledgeable and better able to protect themselves.

Investor Relations

A central fund function acting as an information and communication interface between the fund's management and its clients and investors.

Investor Relationship Management (IRM)

In the alternative assets industry, the process through which the company maintains communication and distributes information about the company, its funds, and its financial performance to existing and potential investors.

L

Leveraged Buyout (LBO) Model

Takeover of a company or controlling interest in a company, using a significant amount of borrowed money. In LBO, the acquiring company uses its own assets as collateral for the loan in hopes that the future cash flows will cover the loan payments.

Limited Partner

An investor in a limited partnership (e.g. a private equity fund).

Limited Partnership

The legal structure used by most venture and private equity funds. The partnership is usually a fixed-life investment vehicle, and consists of a general partner (the management firm, which has unlimited liability) and limited partners (the investors, who have limited liability and are not involved with the day-to-day operations). The general partner receives a management fee and a percentage of the profits. The limited partners receive income, capital gains, and tax benefits. The general partner (management firm) manages the partnership using policy laid down in a Partnership Agreement. The agreement also covers, terms, fees, structures and other items agreed between the limited partners and the general partner.

Long/Short Equity strategies

Long/Short Equity managers seek to profit from investing in equities going long and short. Managers have the ability to shift from value to growth, from small to medium to large capitalization stocks, and from net long to net short. Managers can change their exposures from net long to net short or market neutral at times. In addition to equities, long/short managers can trade equity futures and options as well as equity related securities and debt. Manager focus may be global, regional, or sector specific, such as technology, healthcare or financials. Managers tend to build portfolios that are more concentrated than traditional long-only equity funds.

M

Management Buyout (MBO) Model

A buyout in which the target's management team acquires an existing product line or business from the vendor with the support of private equity investors.

Managed Futures strategies

Managed Futures managers apply strategies using bonds, currencies, equities and commodities futures markets globally. Also referred to as Commodity Trading Advisors (CTA), these managers tend to follow model based systematic trading programs that largely rely upon historical price data. The most common trading programs are long-term trend following ones that tend to invest with directional trends while using stop-loss points to control risk. Other common programs include short-term counter trend and hybrid systematic/discretionary programs.

Multi-Strategy Funds

Multi-Strategy managers seek to profit from allocating to a number of different strategies and adjusting their allocations based upon perceived opportunities. Many Multi-Strategy managers began as convertible arbitrage managers that diversified into other strategies. Because each strategy is not in a separate fund, these managers often have the ability to run higher leverage levels than single strategy managers.

N

Net profit margin:

The net income of a company as a percentage of its sales or revenue. If a company has sales or revenue of $2.5 million and net income of $350,000, its net profit margin is 350,000 divided by 2,500,000, or 14%. This ratio measures a company's operating efficiency (how much of its revenue it spends on expenses), its pricing strategy (how high above its costs can the company price its products), and the amount of profit per sale it makes.

O

Overhead costs:

Business costs-such as rent and utilities-that don't directly relate to the production or sale of goods and services. Overhead is sometimes called indirect cost or indirect expense.

P

Portfolio (Hedge Fund)

The combined security holdings of an individual investor or hedge fund. The objective of holding investments in a portfolio is to reduce risk through diversification.

Portfolio (Private Equity and VC)

A private equity or venture capital firm will invest in several companies, each of which is known as a portfolio company. The spread of investments into the various target companies is referred to as the portfolio.

Portfolio Management

The process of managing the assets of a private equity or hedge fund of funds, including choosing and monitoring appropriate investments and allocating funds accordingly.

Prime Broker

A broker which acts as a settlement agent, provides custody for assets, provides financing for leverage, and prepares daily account statements for its clients, who are money managers, hedge funds, market makers, arbitrageurs, specialists and other professional investors.

Private Equity Model

Private equity is an iliquid asset class and provides equity capital to enterprises normally not quoted on a stock market. Private equity can be used to develop new products and technologies, to expand working capital, to make acquisitions, or to strengthen a company's balance sheet. It can also resolve ownership and management issues. A succession in family-owned companies, or the buyout and buy-in of a business by experienced managers may be achieved using private equity funding. Venture capital is a subset of private equity and refers to equity investments made for the launch, early development, or expansion of a business.

Private Equity Due Diligence

For private equity professionals, due diligence can apply either narrowly to the process of verifying the data presented in a business plan/sales memorandum, or broadly to complete the investigation and analytical process that precedes a commitment to invest. The purpose is to determine the attractiveness, risks and issues regarding a transaction with a potential investee company. Due diligence should enable fund managers to realize an effective decision process and optimize the deal terms.

Private Equity Fund

Entity that makes equity investments in companies that normally are not listed on the public stock market. The vehicles are structured as private investment partnerships in which only qualified investors may participate. Such funds typically charge a management fee of 1.5% to 2.5%, as well as an incentive fee of 25% to 30%. Most private equity funds employ lock-up periods of five to ten years, longer than those of hedge funds.

R

Regulation D

(also Reg. D) This sub-set refers to investments in micro and small capitalization public companies that are raising money in private capital markets. Investments usually take the form of a convertible security with an exercise price that floats or is subject to a look-back provision that insulates the investor from a decline in the price of the underlying stock.

Alternative Investments (Non traditional)

This term describes non-traditional asset classes. They include private equity, venture capital, hedge funds, and real estate funds. In comparison to long investments (equity, bonds, money market) the aim is to either achieve a similar level of risk and higher returns OR  a similar level of return and a lower level of risk.

Assets Under Management (AUM)

The total value of assets that a private equity firm, venture capital company or a hedge fund manages and administers for itself and its clients.

Relative Value:

The Relative Value strategy identifies discrepancies between the prices of financial instruments. When executed carefully, virtually all exposure to the direction of the markets is removed. Relative Value strategies provide the investor with the additional benefit of profiting from market inefficiencies such as volatility mis-pricing.

Risk Arbitrage strategies

Managers who use this strategy invest simultaneously in long and short positions in both companies involved in a merger or acquisition. Risk arbitrageurs are typically long the stock of the company being acquired and short the stock of the acquiring company. The  main risk is deal risk, should the deal fail to close.

Risk (Merger) Arbitrage strategies

Managers using this strategy invest simultaneously long and short in the companies involved in a merger or acquisition. Risk arbitrageurs are typically long the stock of the company being acquired and short the stock of the acquirer. By shorting the stock of the acquirer, the manager hedges out market risk, and isolates his exposure to the outcome of the announced deal. In cash deals, the manager needs only long the acquired company. The main risk is deal risk, should the deal fail to close. Risk arbitrageurs also often invest in equity restructurings such as spin-offs or ‘stub trades'.