Discussion And Analysis Of Operation Of Hedge Fund

The paper defined the hedge funds as the private limited partnership which use the flexible and various hedging techniques to invest a variety financial instruments or the company registered in the duty-free island.The features of hedge funds are with a private placement to raise funds,subject to less regulation,highly complex investment activity and using derivative financial instruments, investment strategies complex and so on . Classification standards are evolving, hedge funds since the founding up through the start-up phase, and changes in the initial development stage, low stage, the slow stage of development, the major development phase and the period of adjust development.Chapter III of this article analyzes the operation of the mechanism of hedge fund. Hedge funds under the guidance of the theory of market failure, using strong and stable financial resources and a large number of financial derivatives as tools for hedging.Its investment strategy is rich and changeable,and more difficult to identify if they mix them. Generally, there are fixed-income arbitrage investment strategy, stock market neutral investment strategies, convertible arbitrage investment strategy, event-driven investment strategies, global asset allocation strategies, sector investment strategies, equity hedge investment strategy, investment strategies in emerging markets, selling space investment strategy. The risk of hedge funds, including its own non-systematic risks, such as strategic risk, credit risk, moral risk, operational risk, but also systemic risks, including price risk, liquidity risk, legal risks.Chapter IV deals with the function of hedge funds, the characteristics of hedge fund risk and return attracting high-risk preferences of investors, the function of the hedge funds determines the possibilities of its development. Hedge funds in the financial markets play an important role, has become the leading representatives of international institutional investors, has become the fastest growing area of international finance has breakn the monopoly that only the pattern of large organizations, established a new market structures. At the same time because of it tend to negative feedback trade,has been an effective tool for stabilizing the market. Finally, hedge funds can more effectively protect the interests of investors.The paper also discussed the negative effects of the Hedge funds. The impact of Macro hedge funds on the international financial markets or the local markets has become an important factor for the financial crisis. And using the Hong Kong Monetary Battle as an example of how the macro hedge fund attack on a country's financial markets, and deepen their dialectical understanding of the hedge funds. Finally, we discussed the way hedge funds into China's financial market as well as the impact on China's market.Chapter V made the relevant policy recommendations to how to develop hedge funds and reduce their impact on the financial system in China. China has joined WTO, the capital market liberalization is only a matter of time. As China's capital market speculation mechanism to perfect, will ultimately appear hedge funds. First of all, to relax the scope of the securities and futures investment, has continued to push forward the process of stock index futures, the development of foreign exchange futures. Second, improve China's financial system, introduce short mechanism.Third, we must actively training the managers who has a rich investment experience. China should improve laws and regulations, clear regulatory objectives of the legislative principles to follow. First of all, to establish the standards of "qualified" investors.Second, to establish the information disclosure system to enhance transparency. Third, establish a sound credit rating and qualification assessment system. At the same time, we must also strengthen indirect control, such as banking, financial derivatives market, foreign financial institutions. Finally, we need to strengthen international coordination and cooperation, try hard to datablish a new international financial order which is conducive to China.