The impact of hedge funds on financial markets since 1990

• Autor(a) principal: Saco, Bruno Dias Rodrigues
• Data de Publicação: 2010
• Tipo de documento: Dissertação
• Idioma: por
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10071/4232
• topic: Hedge funds; Performance measures; Investment strategies; Crise financeira -- Financial crisis; Medidas de performance; Estratégia de Investimento; Trabalho de projeto -- Project work; Mestrado

In the last 20 years, we have been assisting to the emergence of new financial instruments, more and more complex and with more influence on financial markets. In this new financial universe, radically transformed during the 1990‟s, hedge funds, alternative investment funds with absolute return targets, appear for many as a financial institution with negative impact on financial markets. Hedge funds had been criticized for the first time in the early 1990‟s during the ERM crisis, as the Quantum fund of George Soros was accused of speculating on several European currencies. In this thesis, we analyze the various investment strategies followed by hedge funds, as well as their performances during the main financial crises since the 1990‟s. The results show that non directional strategies are the most performing, in particular, Event Driven strategies (seeking to benefit from “special” situations in companies like mergers/acquisitions, IPOs). With a relatively low volatility and large returns, the Distressed Securities strategy seems the best alternative as it presents the best return/risk ratio. However, Global Macro strategy appears to register the highest return but is penalized by its high volatility. When going back to the events on those financial crises, we find that hedge funds have influenced the financial markets in some crises (ERM, Asian crisis) even though this did not happen as a rule. Moreover, because of the characteristics of this financial industry (not concentrated, small amount under management), hed ge funds cannot move entire markets and the influence of individual hedge funds on markets is clearly limited.