Lamp Letter | Lamp Technologies SEC Letter Regarding Performance

Lamp Letter

Lamp Letter Definition

A May 6, 1997, "no-action letter" from the SEC to Lamp Technologies of Dallas indicating that an online hedge-fund database would not violate restrictions against marketing hedge funds. The landmark letter cleared the way for others to launch hedge-fund performance databases on the Internet, and expressed the SEC's opinion that such databases did not represent the type of general hedge-fund advertising that was prohibited under rule 502(c) of Regulation D under the Securities Act of 1933

Definition Source: Hedgeco

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Normal Distribution Kurtosis | Statistics Definition

Kurtosis Distribution

Normal Distribution Kurtosis | Statistic

In probability theory and statistics, kurtosis (from the Greek word kurtos, meaning bulging) is a measure of the "peakedness" of the probability distribution of a real-valued random variable. Higher kurtosis means more of the variance is due to infrequent extreme deviations, as opposed to frequent modestly-sized deviations.

Definition Source: Hedgeco

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Jensen's Alpha | Ratio What is it?

Jensen's Alpha

Jensen's Alpha | Definition What is it?

A risk-adjusted performance measure that represents the average return on a portfolio over and above that predicted by the capital asset pricing model (CAPM), given the portfolio's beta and the average market return. This is the portfolio's alpha. In fact, the concept is sometimes referred to as "Jensen's alpha."

Definition Source: Hedgeco

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Hedge Fund Performance Fee | What are these fees?

Hedge Fund Performance Fee

What are Hedge Fund Performance Fees

The charge -- typically 20% -- that a fund manager assesses on gains earned during a given 12-month period. For example, if a fund posts a return that is 40% above its hurdle rate, the incentive fee would be 8% (20% of 40%) -- provided that the high-water mark does not come into play.

Definition Source: Hedgeco

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Hedge Fund High Water Market | Definition - What is it?

High Water Mark

High Water Market | Definition

A provision serving to ensure that a fund manager only collects incentive fees on the highest net asset value previously attained at the end of any prior fiscal year -- or gains representing actual profits for each investor. For example, if the value of an investor's contribution falls to, say, $750,000 from $1 million during the first year, and then rises to $1.25 million during the second year, the manager would only collect incentive fees from that investor on the $250,000 that represented actual profits in year-two.

Definition Source: Hedgeco

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Hedge Fund Inception Date | What is an inception date?

Inception date

Inception date | What is it?

The day on which a fund starts trading.

Definition Source: Hedgeco

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What is Hedge Funds | What Is a Hedge Fund?

What is Hedge funds?

Q & A What is Hedge Funds?

A private investment vehicle whose manager receives a significant portion of its compensation from incentive fees tied to the fund's performance -- typically 20% of annual gains over a certain hurdle rate, along with a management fee equal to 1% of assets. The funds, often organized as limited partnerships, typically invest on behalf of high-net-worth individuals and institutions. Their primary objective is often to preserve investors'capital by taking positions whose returns are not closely correlated to those of the broader financial markets. Such vehicles may employ leverage, short sales, a variety of derivatives and other hedging techniques to reduce risk and increase returns. The classic hedge-fund concept, a long/short investment strategy sometimes referred to as the Jones Model, was developed by Alfred Winslow Jones in 1949.

Definition Source: Hedgeco

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Capital Hurdle Rate Calculation | Definition What is it?

Capital Hurdle Rate

Capital Hurdle Rate Calculation

The minimum return necessary for a fund manager to start collecting incentive fees. The hurdle is usually tied to a benchmark rate such as Libor or the one-year Treasury bill rate plus a spread. If, for example, the manager sets a hurdle rate equal to 5%, and the fund returns 15%, incentive fees would only apply to the 10% above the hurdle rate.

Definition Source: Hedgeco

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Macro Investing Strategy | Hedge Fund Investment Strategy

Macro Investing

Global Macro Investing | Hedge Fund Strategy

An approach in which a fund manager seeks to anticipate broad trends in the worldwide economy. Based on those forecasts, the manager chooses investments from a wide variety of markets -- i.e. stocks, bonds, currencies & commodities. The approach typically involves a medium-term holding period and produces high volatility. Many of the largest hedge funds follow global-macro strategies. They are sometimes called "macro" or "global directional-investment" funds.

Definition Source: Hedgeco

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General Partner Liability | GP Agreements Definition

General Partner

General Partner Liability Agreements

The individual or firm that organizes and manages a limited partnership, such as a hedge fund. The general partner assumes unlimited legal responsibility for the liabilities of a partnership.

Definition Source: Hedgeco

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Fundamental Analysis Investment Strategy | Research & Ideas

Fundamental Analysis

Fundamental Analysis Investment Strategy

An approach that relies on valuing stocks by examining companies' financials and operations, including sales, earnings, growth potential, asset size and quality, indebtedness, management, products and competition.

Definition Source: Hedgeco

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Fixed Income Arbitrage | Hedge Fund Investment Strategy Definition

Fixed Income Arbitrage

Fixed Income Arbitrage Investment Strategy

An approach that aims to profit from pricing differentials or inefficiencies by purchasing a bond, annuity or preferred stock and simultaneously selling short a related security. Such funds are often highly leveraged.

Definition Source: Hedgeco

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Fund of Funds Management (Multi-Manager Funds)

Fund of Funds Management

Fund of Funds Management | What is it?

An investment vehicle whose holdings consist of shares in hedge funds and private-equity funds. Some of these multi-manager vehicles limit their holdings to specific managers or investment strategies, while others are more diversified. Investors in funds of funds are willing to pay two sets of fees, one to the fund-of-funds manager and another set of (usually higher) fees to the managers of the underlying funds

Definition Source: Hedgeco

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Event Driven Hedge Fund Strategy | What is it?

Event Driven Strategy

Event Driven Hedge Fund Strategy

An approach that seeks to anticipate certain events, such as mergers or corporate restructurings. Such funds, which include risk-arbitrage vehicles and entities that buy distressed securities, typically employ medium-term holding periods and experience moderate volatility.

Definition Source: Hedgeco

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Emerging Markets Investments | Investment Definition

Emerging Markets Investments

Emerging Markets Investment Strategy

Investing in stocks or bonds issued by companies and government entities in developing countries, usually in Latin America, Eastern Europe, Africa and Asia. Such funds typically employ a short- to medium-term holding period and experience high volatility.

Definition Source: Hedgeco

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Maximum Drawdown | Term Definition | What is it?

Maximum Drawdown

Maximum Drawdown Term Definition

The percentage loss that a fund incurs from its peak net asset value to its lowest value. The maximum drawdown over a significant period is sometimes employed as a means of measuring the risk of a vehicle. Usually expressed as a percentage decline in net asset value.

Definition Source: Hedgeco

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Distressed Securities Investing Strategy | What is it?

Distressed Securities Investing

Distressed Securities Investing Strategy

Purchasing deeply discounted securities that were issued by troubled or bankrupts companies. Also, short-selling the stocks of those corporations. Such funds are usually able to achieve low correlations to the broader financial markets. The approach generally involves a medium- to long-term holding period.

Definition Source: Hedgeco

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Derivative Product or Instrument | Definition - What is it?

Derivative Product

Derivative Product / Instrument

A financial instrument whose performance is linked to a specific security, index or financial instrument. Typically, derivatives are used to transfer risk or negotiate the future sale or delivery of an investment. Derivative instruments come in four basic forms: forward contracts, futures contracts, swaps and options.

Definition Source: Hedgeco

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Convertible Arbitrage Hedge Fund | Funds What is it?

Convertible Arbitrage Funds

Convertible Arbitrage Hedge Fund

A conservative, market-neutral approach that aims to profit from pricing differences or inefficiencies between the values of convertible bonds and common stock issued by the same company. Managers of such funds generally purchase undervalued convertible bonds and short-sell the same issuers' stock. The approach typically involves a medium-term holding period and results in low volatility.

Definition Source: Hedgeco

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Compounded Monthly Return | What is it?

Compounded Monthly Return

Compounded Monthly Return Definition

The average monthly increase that, when compounding is taken into account, would have produced a fund's total return over any period of time. For example, if a fund had a one-year return of 20%, its compounded monthly return would be 1.53% -- the amount it would have needed to gain in each of 12 months to achieve that full-year result.

Definition Source: Hedgeco

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Closed Fund | Closed Hedge Fund or Mutual Fund Definition

Closed Fund

Closed Fund (Hedge Fund or Mutual Fund)

A hedge fund or open-end mutual fund that has at least temporarily stopped accepting capital from investors, usually due to rapid asset growth. Not to be confused with a closed-end fund.

Definition Source: Hedgeco


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Bottom Up Investment Approach or Strategy | A definition

Bottom Up Investment Approach

Definition: Bottom Up Investment Approach

An approach that seeks to identify investments that will produce strong returns, before assessing the influence that economic factor will have on those assets

Definition Source: Hedgeco

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Define Beta | A Definition of Beta - What is it?

Define Beta

Define Beta - Short Explanation

Gauges the risk of a fund by measuring the volatility of its past returns in relation to the returns of a benchmark, such as the S&P 500 index. A fund with a beta of 0.7 has experienced gains and losses that are 70% of the benchmark's changes. A beta of 1.3 means the total return is likely to move up or down 30% more than the index. A fund with a 1.0 beta is expected to move in sync with the index.

Definition Source: Hedgeco

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Average Monthly Return | Rate of Return | Definition

Average Monthly Return

Average Monthly Rate of Return

Cumulative gains and losses divided by the number of months of the investment's life, with compounding taken into account.

Definition Source: Hedgeco

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Annualized Rate of Return | Average Annual Return Definition

Annualized Rate of Return

Average Annual Return Definition

Cumulative gains and losses divided by the number of years of an investment's life, with compounding taken into account. The measure is used to compare returns on investments for periods ranging from partial to multiple years.
Definition Source: Hedgeco

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