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Hedge Fund Introduction

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Hedge Fund Introduction
Hedge Funds Class
London February 2007

February 9, 2007

SECTION 1

Class Agenda

Agenda
♦ 9:00 - 10:30 ♦ 10:30 - 10:45 ♦ 10:45 - 12:15 ♦ 12:15 - 1:30 ♦ 1:30 - 2:15 ♦ 2:15 – 3:00 ♦ 3:00 - 3:15 ♦ 3:15 - 4:00 ♦ 4:00 - 4:45 ♦ 4:45 - 5:00 Hedge Fund Basics Coffee Break Basics Continued Lunch Continued Hedge Fund Services Coffee Break Fund of Funds Stuart Trueman Joe Troccolo Tamera Hodges Joe Troccolo Joe Troccolo

Hedge Funds & Corp Finance Laurent Charbonnier Wrap-up / Optional Exam Joe Troccolo

2

Hedge Funds
Joe Troccolo, Managing Director Financial Markets Education
London, February 2007

Table of contents
SECTION 1 SECTION 2 SECTION 3 SECTION 4 SECTION 5 SECTION 6 SECTION 7 SECTION 8

Why Hedge Funds? Hedge Fund Strategies Equity Long/Short Equity Market Neutral Risk Arbitrage Global Macro LTCM: Case Study Appendix: Pick Your Fund

3 28 31 50 60 74 89 100

1

Financial Markets Education
Financial Markets Education provides instruction on all aspects of banking and finance for UBS employees and for our top clients.
Europe Joe Troccolo
London +44 20 7568 0735 joe.troccolo@ubs.com

United States Joe Bonin
Stamford + 1 203 719 6507 joe.bonin@ubs.com

APAC Onn Chan
Singapore +65 6836 5708 onn.chan@ubs.com

Walter Braegger
London +44 20 7568 8938 walter.braegger@ubs.com

Kai-Hing Lum
Tokyo +81 352 08 6494 kai-hing.lum@ubs.com

Spencer Morris
London +44 20 7568 8939 spencer.morris@ubs.com

2

SECTION 1

Why Hedge Funds?

Comparison to traditional strategies
Traditional Fund
Return Characteristics

Hedge Fund
♦ Absolute, positive returns ♦ ♦ ♦ ♦ ♦
(exploit investment opportunity) Return volatility dictated by manager’s approach to risk Liquidity risk Mark to market risk Change of strategy risk Human risk

♦ Relative to benchmark ♦
(capture asset class premium) Return volatility tracks market volatility

Risk Attributes

♦ Market risk ♦ Credit risk

Transparency Regulation Performance Driver
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