Stage 7 Expanded Reading
In this stage you are expected to broaden your horizon into the topic of the lecture.Please read the following article carefully.
Hedge Funds:The New Money Men
In recent years the fund-management industry has been mauled for its excessive and opaque fees,deceptive marketing and rampant conflicts of interest.At the same time,however,not only has the industry flourished,but it has done so in its costliest,highest-leveraged and least transparent segment:hedge funds.Instead of shunning such unregulated funds,investors have been falling over themselves to grab a piece of the action.
Whereas the size of the mutual-fund industry in terms of assets and offerings has merely returned to its level of 2,000,hedge funds have doubled in size and number,according to Hedge Fund Research,a consultancy.In 2004 alone around 400 new hedge funds were created,bringing the known total of 7,000 into rough parity with the number of mutual funds.
The start-up fever is especially acute in many of the lovely,affluent towns in southern Connecticut.New funds begin daily,some in spare rooms in someone’s home,others in waterfront offices with parking for yachts.In Manhattan,midtown office towers serve as hedge-fund warehouses.Tiny windowless offices house unknown operators trying to build a track record.Full-floor suites filled with lavish artwork,gyms and kitchens that bubble over with superb(and healthy)food are the domain of successful funds.The same is true in Boston,San Francisco and London.
Initially sold only to wealthy individuals,then the family offices of wealthy individuals,increasingly hedge funds are now being sought out by large institutions.Foundations and endowments,the least regulated component of the institutional world,came first; company and public pensions are now piling in.The State of New York announced in January that it might put some of its $88 billion pension fund into hedge funds,joining those managing the pension funds of teachers in Texas and Ohio as well as public employees in Chicago and California.If institutions merely meet the amount they currently intend to invest in hedge funds,another $250 billion will be flowing into the industry.
What might hold them back is not desire,but capacity.Such is the popularity of hedge funds that many of the largest are closed or,as they say in the trade,“soft-closed”,meaning that entry requires special pleading—and many plead.Unable to get into established winners,investors are pouring money into managers with no track record but good pedigrees.Last November,Eric Mindich,formerly of Goldman Sachs,raised $3 billion for a new fund.His old partner,Dinakar Singh,will open an equally big fund this month.It is widely believed that either one could have raised two or three times as much money.
Some hedge funds actually hedge,meaning they attempt to invest in a manner that offsets adverse market movements.But since they also want to capture returns,the hedge is never complete and many funds do not even bother.Responding to institutional demand,some new hedge funds restrict themselves to holding long positions in common stocks,just like ordinary mutual funds or,for that matter,traditional accounts managed by brokers on behalf of clients.
Hedge funds have some common characteristics.They are usually pooled investments(like mutual funds)structured as private partnerships(unlike mutual funds).Many carry substantial leverage and are quite rigid about the flow of money from clients.Initial“lock-ups”for as long as four or five years are not uncommon; rarely is money allowed to come in or go out more than monthly.This restriction allows hedge funds to take positions in the most illiquid corners of the market including options,futures,derivatives,and unusually structured securities.
Increasingly,the large funds that have succeeded flit from one area to another.Last year and the year before,when lots of companies were coming out of bankruptcy and the economy was improving,successful funds dominated the market for distressed debt.Since hedge funds can account for more than half the daily volume on the New York Stock Exchange and can have an equally large presence in every other financial market,where they might be today is anyone’s guess.
Investors value this ability to embrace opportunities,magnify returns through leverage,and take difficult positions because of a stable base of assets.But they have not always been so keen.Mutual funds,if structured correctly,can have the same characteristics(though there are some liquidity restrictions).A big reason why mutual funds approach investing differently is that when they tried to take a flexible approach in the mid-1990s they were torn apart by consultants and customers for so-called“style drift”.Complaints reached a crescendo in 1996 when Jeffrey Vinik was hounded out of running what was then the single largest fund,Fidelity’s Magellan,for moving from stock to bonds just a bit before the investment cycle turned.
Under pressure from the press and pension consultants,most(but not all)mutual funds began to follow narrow pre-designated benchmarks that were tightly limited to a class of investing,such as shares of companies included in the S&P 500 index,or an even narrower subset,for example,a mid-cap benchmark.That helped performance in the soaring equity markets at the end of the last decade,but also contributed to their wretched results during the bear market of 2000 to 2002.It also undermined mutual-fund fee structures.Customers realized that much of the funds’ performance simply mimicked the relevant index.Many chose to invest in index funds instead,because these charge far smaller management fees.
The bear market prompted many investors to think it might be good to have money with an investment manager who knows when to invest and,ideally,where to invest,and works within a format that allows him to do so.Relatively good returns,meaning better performance than the market,has become a bit less important than absolute returns(i.e.not losing money,especially when the market falls).
(Source:adapted from articles on hedge funds on www.economist.com)
Task 1:Reading Comprehension Questions
The following questions are asked based on the above article.Please go back to the article and find the answers.
1.What are the key problems of the mutual-fund industry?
2.Where can the new hedge funds be found?
3.Who have become the major purchasers of hedge funds?
4.What do investors do when they cannot access established hedge funds?
5.Why do some hedge funds refuse to hold long positions in common stocks?
6.What do hedge funds have in common?
7.Why are hedge funds so important on financial markets?
8.What do investors do magnify their returns?
9.What investing approach did mutual funds take in the late 1990s?
10.Why did investors choose to invest in index funds?
Task 2:Paraphrasing
Explain in English the underlined words and expressions in the context of the above article.
1.In recent years the fund-management industry has been mauled for its excessive and opaque fees,deceptive marketing and rampant conflicts of interest.
2.Instead of shunning such unregulated funds,investors have been falling over themselves to grab a piece of the action.
3.Full-floor suites filled with lavish artwork,gyms and kitchens that bubble over with superb(and healthy)food are the domain of successful funds.
4.Unable to get into established winners,investors are pouring money into managers with no track record but good pedigrees.
5.Some hedge funds actually hedge,meaning they attempt to invest in a manner that offsets adverse market movements.
6.Many carry substantial leverage and are quite rigid about the flow of money from clients.
7.This restriction allows hedge funds to take positions in the most illiquid corners of the market including options,futures,derivatives,and unusually structured securities.
8.Increasingly,the large funds that have succeeded flit from one area to another.
9.Complaints reached a crescendo in 1996 when Jeffrey Vinik was hounded out of running what was then the single largest fund,Fidelity’s Magellan,for moving from stock to bonds just a bit before the investment cycle turned.
10.That helped performance in the soaring equity markets at the end of the last decade,but also contributed to their wretched results during the bear market of 2000 to 2002.
Task 3:Translation
Read the article again and translate it into Chinese.
阅读文章参考译文：
对冲基金：市场新贵
近年来，资金管理行业因巨额且不透明的收费、欺诈性的营销和疯狂的利益冲突而广为诟病。但是，该行业此时不仅方兴未艾，而且还在收费最贵、杠杆最高、交易最不透明的对冲基金做得风生水起。投资者不但没有远离这些不规范的基金，而且还全力以赴要想从中分得一杯羹。
根据“对冲基金研究”这一咨询机构的数据，虽然共同基金行业的资产与产品规模勉强回到了2000年的水平，但是，对冲基金在规模与数量上已经翻了一番。仅2004年一年就成立了大约400个对冲基金，总数达7 000家，与共同基金的数目不相上下。
创业的激情，在南康乃狄克州许多美丽富裕的小镇比比皆是。每天都有新基金创立，一些是在个人的多余房间里，另一些是在停放游艇水边的办公室内。在曼哈顿，市中心的办公楼成了对冲基金的温床，不为人知的操盘手在狭小无窗的办公房内试图创造业绩。那些整层楼的套房布满了奇珍异宝，配有健身房，摆放着健康美食的厨房，这些都是基金公司成功的象征。波士顿、旧金山、伦敦的情况也是如此。
对冲基金最初只卖给富人，后来扩展到他们的家族公司，现在开始卖给大机构。各种福利基金和捐赠基金，在民间组织中被监管力度最低，因此首先踏入对冲基金的门槛。现在，公司和大众养老金也纷至沓来。今年1月份，纽约州宣布有可能把880亿美元的部分养老金投放对冲基金，与得克萨斯和俄亥俄州的教师养老金以及芝加哥和加州的公务员养老金一道，加入养老金管理的行列中。假如这些机构只将目前的意向金额投向对冲基金，那么，又将会有2 500亿美元涌入这个行业。
能够阻止投资者的不是欲望，而是能力。许多大型对冲基金知名度很高但却是封闭型的，用行话来讲叫“软封闭”，意思是进入这类基金需要特别的保证，并且许多都作出了保证。由于难以踏入知名的基金，投资者只好把钱投向那些没有什么业绩但有很好从业背景的基金经理。比如去年11月份，曾就职于高盛的艾瑞克·米迪奇，筹集了30亿美元新建了一只基金。他的老伙伴，迪纳卡尔·辛格，本月也将推出一支金额相等的基金。外界普遍认为，他们俩无论是谁都有可能筹到两到三倍的资金。
有些对冲基金确实是对冲，即它们试图通过投资来抵消不利的市场波动。但是，因为它们也想获利，所以对冲从来都不完全，甚至有许多基金公司连想都不想。为了满足机构投资者的要求，一些新建的对冲基金把自己限制在普通股中做多，就像一般的共同基金一样，或者像传统账户由经纪人代客管理一样。
对冲基金存在着某些共性。它们通常会像共同基金一样去筹集资金，但又不同于共同基金的是，它们筹资的方式是私人合伙。许多对冲基金使用高杠杆，对客户的资金流向严格把控。“锁定期”长达四、五年司空见惯，而且资金流动的频率一般低于每月一次，这个限制有助于对冲基金在流动性最弱的市场建仓，包括期权、期货、衍生品以及各种复杂的证券。
越来越多成功的大基金到处去各显身手。前一两年，当许多公司走出破产而经济又出现回暖时，成功的基金公司便占领了坏账市场。由于对冲基金能够占到纽约证券交易所日交易量的半壁江山，它们在任何金融市场上都能举足轻重，因此，大家都在揣测它们的流向。
能够抓住机遇，通过杠杆扩大收益，依托稳定的资产基础去建仓，这是投资者目前很看重的能力，但他们对此并非一向热衷。共同基金如果结构合理，尽管会受到某些流动性的限制，但同样也能具备上述特点。共同基金之所以目前采用不同的投资策略，是因为他们在二十世纪九十年代中期想采用变通做法时，投资顾问和客户以所谓的“风格偏差”为由，对他们进行猛烈炮轰。1996年，杰弗瑞·维尼克管理着当时最大的单只基金——富达投资的麦格兰基金，当他被查出在投资周期出现变向（股票市场看涨）的前夕，抛售股票买进债券，投资民众一片哗然，怨声载道。
在新闻界和养老金顾问的压力下，大多数（但不是全部）的共同基金开始遵循预定的、只限于投资的严格标准，例如只投资标普500指数中的公司股，或者限定在更窄的范围比如中盘股。这种做法在十年前的末期股市火爆时，提升了他们的业绩，但同时也导致了在2000年至2002年熊市中经营惨淡的结局，此外还破坏了共同基金的收费结构。当客户意识到基金的表现在很大程度上只不过是相关指数的翻版时，许多人选择了投资指数基金，因为管理费收取更低。
熊市之下，许多投资者都认为应该把钱交给投资经理，因为他知道何时何地投，并且在一套规范标准之下运作。相对高的收益，即比市场好的业绩，已经没有绝对收益那么重要了，因为绝对收益是指任何时候尤其是市场下跌的时候不亏钱。