Hedge Funds (2235.YR.004823.1)

General information

Type:	OPT	Curs:	1	Period:	S semester
ECTS Credits:	3 ECTS

Teaching Staff:

Group	Teacher	Department	Language
Year 1	David James Norman	Economía, Finanzas y Contabilidad	ENG

Previous knowledge necessary to make the most out of the course are the following: basic financial theory, the basics of portfolio construction, basic statistics, and knowledge of financial instruments.

The workload distribution will consist of:
o Lectures.
o Practical and participative sessions
o Readings
o Tutorials.

There will be two linked assignments during the course, one in a practical Group context and the other a written individual report.

ASSIGNMENTS

Group Assignment 1: How do Hedge Fund Managers manage risk? - 30 Minute Challenge

- Students form Groups of 3-5 participants, and the 30- minute challenge is conducted in-class
- They are then provided with a specific macroeconomic context which they will use to suggest the most appropriate hedge fund strategic approach and the different risks involved
- They will then be asked to describe how they would manage these risks
- Students are expected to provide a short 10-minute presentation including the following 1) describe the macroeconomic context provided 2) detail the investment concept and the risks involved 3) How the hedge fund manager could control and reduce the risks


Individual Assignment 1: The Day in the Life of a Hedge Fund Manager

- Students should write a report describing how a hedge fund manager picks a trading strategy
- They should firstly describe the work processes, technology and market environment that the hedge fund manager is in contact with
- Then they should detail the investment objective of the hedge fund manager
- They should then describe what information and knowledge the hedge fund manager needs to find in order to fulfil this strategic approach
- Students are expected to incorporate the following into their report 1) investment objective 2) macroeconomic context 3) investment thesis on the strategy and expected risks 4) what to incorporate into the analysis 5) How to measure results.

- To add value to financial education regarding alternative investments, one of the key areas in the modern asset management business.
- To be able to understand more fully the working requirements, processes and practices of a hedge fund
- To understand the market context in which hedge funds operate and the risks involved
- To understand how to create a hedge fund

The course is designed to provide a comprehensive understanding of hedge funds, their strategies, and the key elements involved in their analysis and risk management.
In recent years, hedge funds have become an increasingly prominent part of the financial markets. The strategies and performance of hedge fund managers have gained wide attention. Yet, for many, hedge funds remain a mystery despite the huge amount of money under management. How do they work? Which are the strategies they use to exploit volatility, mispricing and inefficiencies in global capital markets? How to start your own hedge fund?

1. Module 1: Introduction to Hedge Funds ¿ Hedge funds overview: Definition, corporate structure, management and other characteristics ¿ Historical development of hedge funds and their role in the financial markets ¿ Comparison of hedge funds with other investment vehicles (e.g., mutual funds, private equity) ¿ Key legal structures: Limited partnerships, offshore entities, onshore funds ¿ Investor protections and disclosures ¿ Insider trading and other legal considerations

2. Module 2: The Risks, Challenges, and Opportunities ¿ Trends in the hedge fund industry: Industry size, fee structures, and performance ¿ Environmental, Social, and Governance (ESG) considerations ¿ Impact of technology and quantitative strategies ¿ Hedge funds in a changing economic landscape ¿ Understanding and measuring different types of hedge fund risk: Market risk, liquidity risk, operational risk, counterparty risk ¿ Various Portfolio construction techniques and diversification options ¿ The role of Value at Risk (VaR) and stress testing ¿ Risk management tools and best practices

3. Module 3: Hedge Fund Strategies and Performance ¿ Equity-focused strategies: Long/short equity, market-neutral, event-driven, activist investing ¿ Fixed income and credit strategies: Global macro, distressed debt, convertible arbitrage ¿ Alternative strategies: Managed futures, statistical arbitrage, volatility trading ¿ Fund of funds and multi-strategy approaches ¿ Fund selection and due diligence process ¿ Performance evaluation metrics: Risk-adjusted returns, alpha, beta, Sharpe ratio ¿ Analysis of hedge fund disclosures: Form ADV, offering memorandum, audited financial statements ¿ How to evaluate hedge fund managers: Study the fund track record, investment philosophy, risk management and ESG statistics

4. Module 4: A Day in the life of a Hedge Fund ¿ How does a Hedge fund operate internally and what external institutions do they interact with? ¿ What corporate processes do hedge funds use internally? ¿ Technology: what are the opportunities and challenges? ¿ How do Hedge Funds take advantage of Quant-based trading technology? ¿ How does the hedge fund assess the behaviour of the asset markets on a real-time basis? ¿ What analysis do hedge funds perform for special events or investment situations? ¿ Describe Systematic/Discretionary/cross-asset strategies and Non-Correlated Trading strategies

5. Module 5: How to Start your own Hedge fund ¿ Documentation and Rules ¿ Fund of Funds performance improvements ¿ Manager selection and selecting a Prime Broker Private equity/SPACs and other ways of funding ¿ Improving the hedge fund¿s Sharpe Ratio ¿ Hedge fund regulation: AIFM Directive, reporting requirements, compliance considerations, domicile (onshore/Offshore)

Throughout the Course we will be using Industry Fintech including Bloomberg and Refinitiv Workspace in order to provide real-world experience. Through the use of technology we can show how working practices shape the hedge fund worker's day and how hedge fund managers interact with the financial markets. We can also demonstrate how the risk management, compliance and order execution processes interact with the daily activities.

The course has been designed on three levels in order to promote understanding and the implementation of the basic concepts.

The syllabus has therefore been designed to include:

1.A theoretical level: Theoretical concepts are formally presented and then applied by means of examples. In order to do so, students will be provided with materials that are used in class to develop each subject.

2.A self- learning level: Students will be given reading assignments on both theoretical and research contents which will provide them with in depth knowledge of the topics that are covered in class.

3.A relational or group level: The course makes use of the case study methodology whereby students working in groups can analyze, propose and put forward solutions to the cases they have been assigned

Group	Teacher	Department
Year 1	David James Norman	Economía, Finanzas y Contabilidad