CONTENT INTRODUCTION...... 4 I THEORETICAL PART OF RESEARCH ...... 7 1 Theories classification ...... 7 2 Investment theories ...... 9 2.1. Investment approaches ...... 9 2.2. Investment psychology ...... 11 2.3. Investment strategies ...... 16 3 Hedge fund strategies ...... 19 3.1. Strategy building ...... 20 II ANALYTICAL PART OF RESEARCH ...... 24 4 Characteristics of analyzed hedge funds ...... 28 5 External analysis of hedge funds ...... 34 5.1. Investment industry review ...... 34 5.2. PESTLE external environment audit ...... 40 5.3. Comparative analysis of hedge funds’ regulation ...... 44 6 Internal analysis of hedge funds ...... 47 6.1. Hedge Fund Strategies: content and comparative analysis ...... 47 6.2. Comparison of failed vs. successful funds by strategies ...... 58 7 Identify factors influencing hedge fund results ...... 59 III PRACTICAL PART OF RESEARCH ...... 65 CONCLUSION ...... 66 REFERENCES ...... 69 APPENDIXES ...... 75

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INTRODUCTION Hedge funds have influence on companies and global economy, that is why their strategies are important for understanding. After financial crisis of 2008 and 2014 global markets used to have unstable behavior, moreover in face of fourth industrial revolution according to Klaus Schwab’s research, technological competition will create new advantages for early adopters and weaknesses for companies who lately will start using new IT and algorithms in investment industry. After the financial crisis of 2008 and 2014, a crisis of confidence came on world markets. However, we can observe a long growing market over the last decade. The development of information technologies has changed the market and investment environment. Today, investors can receive information quickly and easily, fresh and important news about changes in the industry and this helps them be ready for corrections and reversals of the market, compared with the possibilities of 20 years ago. The best technological capabilities require large financial opportunities, given hedge funds, in the sense of attracting accredited investors (with investments starts from $ 1 million dollars), standardly develop their Research & Development departments to gain a technological advantage over competitors. Such developments increase the speed of obtaining and the amount of information processed, as well as the speed and quality of data analysis for making investment decisions. The relevance applies in the fact that Russia as a developing country and requires foreign investments in its business and infrastructure. Such investment model is classical, this model used by Singapore for example. Russia able offers profitable investment proposals in connection with resource wealth, the development of businesses across regions in a large area, hedge funds can be a useful tool to accelerate the development of businesses and the country, in addition to the return on investment. However, foreign investors under the influence of political factors, socio-cultural circumstances and business moments that differ from Western standards, for example, the difficulty of checking information, the difficulty in depositing funds, the bureaucratic liabilities, etc., prefer to invest in familiar companies and countries. Thus, due to the infusion of large funds into foreign funds, the economies of such countries supported in development. If investments are more likely to occur in foreign markets, then how will Russia develop without classical investment instruments? In this research, we will identify factors that complicate the possibility of investing in Russian hedge funds, as well as barriers in the work of the funds themselves and compare them with the opportunities and problems of hedge funds in other countries, identify differences in strategies, business, corporate and investment. Based on this analysis, recommendations will be developed to improve hedge fund strategies. The hypothesis of the study – next factors affecting the financial results of hedge funds: 4

1) technological advantage, the use of research and development to accelerate the collection and analysis of data, data for making investment decisions and trading algorithms, 2) free regulation in comparison with other investment companies, expressed in the freedom of investment and trade, 3) the impact of the political agenda on the investment portfolio formation, 4) strategies based on the understanding of the irrationality of the market and its participants, have more flexible and independent strategies, which reduces the risk of losses, 5) participation of investors in decision-making due to their special status and opportunities - institutional and individual. The problem is that the Russian investment market is developing only two decades, and the activities of Russian hedge funds are different from foreign ones, this study will allow us to identify these differences, as well as differences in the factors and conditions in which Russian hedge funds operate. For this analysis of hedge funds, you need to answer the following questions: 1. What are the competitive advantages of hedge funds as participants in the financial market? 2. What is the difference between the strategies of Russian hedge funds from foreign? 3. How are investors involved in the strategy development process? The purpose of the research is to determine the factors that influenced effectiveness of hedge funds and make recommendations on strategies in a changing environment The study consists of the following objectives: 1. literature review (theoretical study), the choice of research methods and theories for analysis, 2. data collection 3. analysis of the external and internal environment, factor analysis, 4. conclusions on the results of the study and recommendations. Research methods: 1. PESTLE analysis, 2. content analysis, 3. comparative analysis of Russian and foreign hedge funds, 4. factor analysis (correlation), 5. matrix "probability-effect", 6. SWOT analysis. The object of study – hedge funds (managers and investors). The subject of research – the factors influence on effectiveness.

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Hedge funds are known for managing large amounts of funds, according to recent estimates of about $ 3.6 trillion. Hedge funds have minimal regulation and restriction of activity in the industry, for example, they can use derivatives and short positions. The study consists of an introduction, theoretical, analytical and practical parts, the conclusion. In practical part which presents practical recommendations for improving the activities of hedge funds. In the theoretical part, an analysis of textbooks, monographs, research, scientific and analytical articles. In the analytical part, data collected from open sources, analytical and business publications, the official sites of the hedge funds themselves, from interviews with hedge fund managers in the public domain, as well as from managers' responses to questionnaires. In research were analyzed 8 hedge funds presented in table 1.1.

Table 1.1. Hedge funds list

№ Fund name Location Type AUM 2018, $ 1 AQR capital management Greenwich, U.S.A. LLC 203 billion 2 Bridgewater associates Westport, U.S.A. LP 124.7 billion 3 Man group London, U.K. Public 108.5 billion 4 Citadel Chicago, U.S.A. LLC 32 billion Hermitage Capital Moscow, Russia – London, UK 5 LP 4 billion Management 6 VR Global Offshore Fund Moscow, Russia Ltd. 1.7 billion 7 Arbat Capital Moscow, Russia Ltd 150 million 8 Kvadrat Black Fund SP Moscow, Russia SP 100 million

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I THEORETICAL PART OF RESEARCH 1 Theories classification The complexity of research area and a large variety of theories make possible to contribute aspects to the extensive analysis executed in this research. Therefore, this dissertation will limit the amount to a well-chosen variety of theories, which shortened to the most important factors regarding the following research. The classification, presented in picture 1.1., should enable to evaluate the empirical and analysis part.

Investment strategies Investment approaches

Investment theories

Business strategy Investment strategies Strategic analysis

Strategic management

Behavioral finance: rationality, Decision-making irrationality

Investment psychology

Regulation Culture of investing

Investment differences in Russian and foreign industries

New technologies Political factors Financial background Change management

Contemporary changing environment

Picture 1.1. Theories classification

This classification presents how theories describe specific knowledge necessary for research, applying to research objective – literature review. First, what is a hedge fund? According to Barclay Hedge Definition: Hedge fund (HF) is an alternative investment vehicle available only to sophisticated investors, such as institutions and individuals with significant assets.

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Hedge funds are pools of underlying securities and they can invest in many types of securities. There is no uniform definition of the term “hedge fund” in current literature. Also, a legal definition, an industry-wide definition or a definition by the SEC or similar authorities is lacking. The term matches to a large variety of different fund strategies that are discussed in the following subsection. These strategies do not even have to involve hedging. HFs are usually structured as limited partnerships, with the general partner being the portfolio manager, making the investment decisions, and the limited partners as the investors. This legal form exempts the funds from a wide range of legal requirements and regulations. HFs are not currently regulated by the U.S. Securities and Exchange Commission (SEC), a financial industry oversight entity, as mutual funds are. However, it appears that regulation for hedge funds may be coming soon. Also, because of being relatively unregulated, hedge funds can invest in a wider range of securities than mutual funds can. While many hedge funds invest in traditional securities, such as stocks, bonds, commodities, and real estate, they are best known for using more sophisticated (and risky) investments and techniques. Therefore, for this paper a HF is defined as any registered or unregistered, privately- offered, managed pool of capital with currently only wealthy, financially sophisticated investors as target customers and which is associated with the following characteristics: -Subject to the same market rules as any trader. -HFs are a part of the alternative investment’s universe. -Possibility to use derivatives and leverage. The allowance to perform short sales separates HF managers from mutual fund managers. -HFs use different degrees of leverage. Some strategies are not viable without large amounts of leverage; other strategies do not involve leverage at all. -Performance is measured in absolute terms (returns), not relative to a benchmark. -The returns come from different sources in different proportions. Thus the “absolute return” consists of returns from the underlying markets and alpha sources. The target absolute return is always higher than that of a passive strategy. -Different kinds of fees are charged. Most common ones are a 1-2% p.a. a fee of asset under management and a 20% p.a. a fee of profits. -HF managers almost always invest in their own funds. This hinders the HF managers to take uncontrollable risks. -Some widespread opinions are their superiority in bear markets, low correlation with equity markets, high return potentials and usefulness for diversification.

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Presented hedge fund defining and classification make clear theories uses in analysis to identify factors that influenced on hedge funds performance.

2 Investment theories Theories related to investments, presented in picture 2.1., help to see more clearly the tools used by hedge funds managers to achieve effective results.

Investment approaches Investment strategies

Strategies based on rational behavior: Long-Short Equity market confidence, financial analysis, quantitative methods Relative value

Event Driven

Irrational behavior: high risk insurance Global Macro

Multi-strategy

Picture 2.1. Investment theories classification

Investment strategies supplemented by investment approaches. Presented classifications are basic, from company to company strategies and approaches may differ.

2.1. Investment approaches Hedge funds use different investment and trading approaches with different risk levels. Modern investment approaches classify depending on the level of market confidence: №1. With a high level of confidence in market predictability. Approaches based on rational behavior of market participants, designed for market stability, based on confidence in price forecasts, based on the concept of game theory, when all market participants certainly try to get the best benefit in a situation, having a rough understanding of the characteristics of competitors. Most often, this approach combined with strategies that justify the investment decision on the analysis of financial indicators, as well as market data. The objective disadvantage of this approach is the lack of flexibility for unexpected market changes. With this approach, strategies mostly used as equity hedge, macro. Beta strategies.

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№2. Approaches based on the irrationality of the behavior of market participants: less dependent on unexpected corrections or unexpected growth. With this approach, strategies mostly used as event-driven, relative value, fund of funds, multi-strategy. Alpha strategies. Basically, hedge funds can use a relative return model and absolute return model presented in picture 2.2.

Relative Return Absolute Return Model Model

Return Objective Relative to Absolute return benchmark target

Portfolio positions Long Short position position

Sources of return Beta Alpha

Relevant risk Tracking Total risk risk

Manager Focus Capture Preserve premia capital

Picture 2.2 Relative return model vs. absolute return model

Classical model of an investment approach which characterizes according to investment strategy. 1) Fundamental analysis: long-term investment approach. Evaluation of quantitative (financial reports, historical facts, statistics) and qualitative (fundamental factors depending on the concrete instrument) as the company’s management, etc. 2) Factor models: based on quantitative multifactor analysis defining risk and return factors that affect or explain stock prices. 3) Statistical arbitrage: based on technical analysis, which uses predictable movements between equities. Characterizes as short-term high-frequency trades. Classical investment approaches define irrational behavior as anomalies but a modern understanding of human irrationality acknowledged as standard, such changes occurred after D. Kahneman human irrationality concept in research of behavioral finance.

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2.2. Investment psychology Previous modern investment approach based on market trust level, separated by rational and irrational definition of market by hedge funds’ managers based on modern behavioral finance theories presented in table 2.1. In recent years, researchers have proven that the psychology of behavior in the financial market is a serious part of the investment, affecting the financial results and the success of the activity.

Table 2.1. Investment psychology

Theory Description Classical The classical financial theory assumes that investors are rational and prices for theories securities fully reflect the available information, and price changes should be random. Basic conceptual framework and hypotheses: 1. Perspective Theory: Explains how decision-makers behave when faced with a choice in the face of uncertainty and formalizes the S-shaped value function to replace the expected utility function in the theory of expected utility. 2. The disposition effect: a four-element behavioral model to study the effect of disposition: perspective theory, mental metering, aversion to regrets, and self- control. 3. The relationship between the overconfidence effect and the dispositions, authors suggested that people often make wrong judgments about the likelihood of an event and, compared with the actual case, they think that they overestimate the situation. That is, people are usually too self-confident. Decision Stein and Welch (1997) argued that no cognitive selection theory, nor the making dominant decision rule, prevailed, they noted the existence of filters and simplifying mechanisms through which people process information and interpret the environment. The following decision theories exist: 1) Perspective theory. 2) Ambiguity model. 3) Culture and decision-making. 4) Cultural and ethical model of decision-making. [17] Emotional Woodward and Schlosberg use in the measuring approach of emotions: pleasure- intelligence displeasure, relaxation-tension, and peace-excitement. Emotional intelligence consists of mental abilities: understanding emotions, their conscious regulation, assimilation in thinking, differences and expressions of emotions. It assumed that for the effective management of emotions, a person needs to have an idea of the existing points of view on the problem of emotions. [54] Behavioral Behavioral finance is a new approach by D. Kahneman, he examined the finance psychological problems associated with the decision-making process. 1) People will make mistakes if they use so-called heuristics instead of rational models for data analysis. Heuristics are practical rules that facilitate decision-making. 2) Circumstances that influence decision-making processes. Shleifer (2000) calls this a "frame." The main goal of behavioral finance is to research "fallacies in competitive markets." [16]

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The classical financial theory assumes that investors are rational and prices for securities fully reflect the available information, and price changes should be random. In the 1980s, the results of many empirical studies identified the basic conceptual framework and hypotheses: 1. Perspective Theory: Explains how decision-makers behave when faced with a choice in the face of uncertainty and formalizes the S-shaped value function to replace the expected utility function in the theory of expected utility. The theory is based on two provisions: 1 - the investor's utility is a function of the profits and losses relative to a fixed control point, and not a function of welfare levels. 2 - investor utility functions are concave in the profit area and convex in the loss area. Also, according to the theory, investors use the valuation function, which reflects the risk aversion in profits and the search for risk of losses. 2. The disposition effect: Shefrin and Statman (1985) suggest using this effect to demonstrate the ubiquitous behavior of holding too long unprofitable and selling too early profitable positions. They used a four-element behavioral model to study the effect of disposition: perspective theory, mental metering, aversion to regrets, and self-control. 3. The relationship between the overconfidence effect and the dispositions Liechtenstein, Fishhoff and Phillips (1982) suggested that people often make wrong judgments about the likelihood of an event and, compared with the actual case, they think that they overestimate the situation. That is, people are usually too self-confident. Oden (1998) noted that overconfidence may arise because of an investor reevaluating the accuracy of their private signals and their knowledge of the value of financial security. They always remember success and easily forget failure. Excessive confidence often leads to the wrong decision and, therefore, lost the opportunity to correct or increase the ability to make the right decision. Thus: overconfidence is positively associated with the disposition effect. Psychological decision-making models by Stein and Welch (1997) have shown that cognitive psychology provides tools for analyzing simple rules that people use in responding to complex and poorly structured dilemmas. Although they argued that no cognitive selection theory, nor the dominant decision rule, prevailed, they noted the existence of filters and simplifying mechanisms through which people process information and interpret the environment. The influence of these filters and simplifying mechanisms on the decision-making process always represents contextual and individual differences. As a result, these deviations may lead to conflicting expectations regarding judgments and behavior, which not yet explained by any decision theory. Although cognitive psychology did not create actual problems for rational models by proposing a general and compatible decision theory, it could explain to some extent why people might deviate from rational behavior. For example, one of these explanations based on the principle that people's beliefs or cultures can influence and distort information processing. 12

The following decision theories exist: 1) Perspective theory. 4) Ambiguity model 5) Culture and decision-making. 6) Cultural and ethical model of decision-making. Today, emotions viewed as a measurable part of consciousness that connects emotions, motivation, and behavior. Woodward and Schlosberg use in the measuring approach of emotions: pleasure-displeasure, relaxation-tension and peace-excitement. Emotional intelligence consists of mental abilities: understanding emotions, their conscious regulation, assimilation in thinking, differences and expressions of emotions. It assumed that for the effective management of emotions, one needs to have an idea of the existing points of view on the problem of emotions. Psychologists, philosophers, physiologists, and sociologists research emotions. [55] Behavioral finance is a new approach by D. Kahneman, the Nobel Prize winner of 2002 for his contribution to the development of this theory. He examined the psychological problems associated with the decision-making process. Behavioral finance is a combination of areas of economics and psychology. 1) People will make mistakes if they use so-called heuristics instead of rational models for data analysis. Heuristics are practical rules that facilitate decision-making. For example, an investor who will not invest in a fund with poor performance in recent years, but in a fund that is constantly evolving, uses heuristics. Behavioral finance states that a large number of people follow these rules in the capital markets. Subjective and biased heuristics lead to non- optimal portfolios. 2) Circumstances that influence decision-making processes. Shleifer (2000) calls this a "frame." Behavioral finance analyzes how people influence “form and content”, such as temporary pressure, need for liquidity, change of laws, etc. affect the prices of securities. The main goal of behavioral finance is to research "fallacies in competitive markets." Traditional theories only point out that some people act irrationally or do not have the same quality of information or knowledge as others. In conclusion, markets should not regard as effective, given the psychological effects to describe people's behavior. Consequently, this model can better explain the hedge funds, which benefit from market inefficiencies, such as arbitrage, overestimation and undervaluation, and bubbles. Hedge funds are associated with the financial market, where the decision-making process based on an understanding of the psychology of investment, the theory of behavioral finance and emotional intelligence. According to Hogarth (1994), perspective theory has two main elements: the cost function, which works similarly to the utility function in the theory of expected utility, and the decisive 13 weight function for analyzing weights, which related to the probabilities of choice. Thus, questionable alternatives evaluated using a methodology similar to the theory of expected utility. The cost function represents three main characteristics: (a) people implicitly evaluate results in terms of profits or losses, (b) people are more sensitive to changes between results, the closer they are to the control point, and (c) people experience losses and gains with different intensity levels. Although there are a number of other implications of the cost function of the Prospect Theory, the same vague conclusions may stimulate a different perception of profit or loss when control points change. As a result, due to these heterogeneous views, the choice may be more difficult to predict. The decisive weight function shows how individuals implicitly weigh the probabilities that link the choice with the results, by super evaluating small probabilities and incorrectly estimating high probabilities. The Prospect Theory ambiguity model assumes that people identify exact probabilities that associate choice with results. However, it is worth noting that Hogarth (1994) introduced a new understanding, confirming that perception of ambiguity affects the choice since people are usually unclear about the likelihood of events that may affect results. As Hogarth successfully illustrated: “For example, when considering a decision on insurance against car theft, did any of us know the exact probability of theft in a certain period?”. Both the perspective theory and the ambiguity model offer insights into how decision-making can occur under conditions of uncertainty in several situations. In theory, the perspectives of a decision-making phenomenon are associated with alternatives that are associated with losses or benefits based on a specific control point, while in the ambiguity model, decision-making developed through a multi-perspective evaluation process. After studying several decades of research into the psychological, interactive, and temporal aspects of decision-making, Hoch et al. (2001) noted that the emerging field of the Behavioral Theory of the Games provided a new understanding of the negotiation process and what actions people are taking to choose a mutually acceptable solution. From the point of view of descriptive approaches to decision making, they analyzed how people make decisions and how they can make the best. In accordance with the principles of the theory of prospects, at the collective level, the normative theory of choice offers a cost-benefit analysis like the theory of expected utility. Decision-makers determine the impact of the expected utility and the costs and benefits of a alternative. Thus, people affected by these alternatives usually make decisions based on normative models. Finally, based on the assumption that there is a link between decision-making and social behavior, Hershey and Ash (2001) discussed three characteristics that have a direct impact on behavioral phenomena in the decision-making process. In their opinion, people tend to appreciate alternatives that offer early assurances, therefore they are very eager to avoid or delay complex 14 trade-offs, and people often seek to change their minds. These phenomena are important not only for broader social decisions but also for management evaluations. In both rational and psychological models of decision-making, people are their central element, either as decision-makers or as those influenced by decisions. If this assumption is appropriate, culture can play a role in the decision-making process. The assumption that culture can be an element in any decision equation comes from the key concepts of culture and decision- making, as well as the interrelationships between them. Some authors formulated a broad definition of culture, describing it in various terms, such as basic assumptions, feelings, beliefs, values, behavior, etc. (Adler, 1991; Hofstede, 1997; Lewis, 1992; Schein, 1992; Trompenaars, 1994) For example, Trompenaars (1994) suggested that culture guides people’s actions. He confirmed, “Culture was created by man, confirmed by others, standardized and transferred for training young people or beginners. Triandis (1972) considered culture as a social phenomenon that builds the structure of general knowledge, gives meaning to incoming stimuli and directs outgoing reactions. He suggested that the values indicate unclear landmarks that may cause behavior. In the field of decision-making, several authors (Geva & Mintz, 1997; Hastie & Dawes, 2000; Higgins & Bargh, 1987; Hogarth, 1994; Meneghetti & Seel, 2001; Stein, & Welch, 1997) discussed the importance and influence of beliefs, values and behavior in decision-making. Decision and behavior can be basic elements of decision-making phenomena, which include the processes of thinking and reacting to stimuli of the external world. Culture teaches life preferences and manifests itself in how people behave, think and believe. For example, Higgins and Barg (1987), who studied several decision-making models, found that the culture they call filters and simplifying mechanisms helps people process information and interpret the environment. Hogarth (1994) confirmed that individuals must evaluate results in terms of profit or loss and are more sensitive to changes between results according to their starting point or what Higgins and Barg called schemes. Thanks to its broad concept, culture helps to describe complex and orderly principles that influence the process of thinking and acting, which constantly happens when people are looking for solutions. Although everyone is always looking for answers for a limited number of common problems, there is limited variability in problem solving, and all alternatives and solutions are always present in all societies, but they are differently preferred. An analysis of the literature reveals a link between culture and decision-making. Because organizations faced with growing new challenges in the 21st century, managers may have to follow decision-making processes that incorporate sustainable development concepts into both strategic and operational planning, which required an adaptive decision-making model. One of the basic

15 assumptions of such a model is that the ethical and moral, cultural values by their nature belong to it. In many areas of human knowledge, decision theory is widely researched. The literature has shown that choice and behavior represent the main characteristics of decision-making phenomena and include the processes of thinking and responding. The decision is the answer to the situation and includes judgment, expectations, and evaluation. Rational methodologies explain how decision-makers analyze a few different results from each alternative scenario to select the final choice. Psychological decision-making models suggest the existence of special mechanisms by which people process information and interpret the environment. Such mental processes based on the principle that people's beliefs and values can influence their information processing. These beliefs and values called schemas and include concepts about yourself, other people, and scenarios. Rational decision-making models establish a weighting mechanism between choice and cost. Rational methodologies lead to optimization of results, focusing on the selection process, and not on what selected. A specific alternative always selected when its expected value is greater than that of other potential options. Culture dictates life preferences and manifests itself in how people behave, think and believe. Decision-making phenomena also include the processes of human judgment on the macro and microenvironment in constant connection with the values and beliefs of people. Therefore, decision-making processes have a strong cultural component that can influence the style of decision-making, the perception, and attitude of decision-makers. [8]

2.3. Investment strategies Investment approach defines which strategies manager will choose according to his understanding of market behavior. In hedge funds, the investment manager usually chooses a core strategy and decides how he will make the investment decision. Figure 2.2 presents the five main strategies used by hedge funds today, strategies classified from left to right by trust level to market, from low level of trust to high level.

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Equity Hedge Event-Driven

Macro Relative Value

Multi Fund of Strategy Funds

Trust level to market (from high to less)

Picture 2.2. Investment strategies

These strategies are main for investment industry, but hedge funds can use more methods to implement investment strategies. 1) Equity Hedge: using 50% or more of fixed capital, long and short positions are set for the underlying financial instruments (securities) and for the remaining part of the capital, they are long or short for derivatives (derivatives of the main ones, such as futures). Such a strategy involves investing in one instrument, for example, a long position, in anticipation of growth, and risk hedging occurs by opening the opposite of the expected growth or depreciation scenario in another transaction, for example, futures on this asset. Then, in the event of a decrease in the value of the asset in the expected time, the fund receives the invested profit from a futures position. In drawing up the investment portfolio, both quantitative and fundamental methods of asset valuation are used. Strategies, in turn, can be widely diversified or narrowly focused on specific sectors of the economy. In addition, investment managers use a different level of advantage and invest in different terms. 2) Event-Driven: such strategies try to take advantage of events that create significant price movements. With such a strategy, investment managers use a wide range of financial instruments, long and short positions in common and preferred securities, bonds, options, credit default swaps, and a high level of advantage, at the discretion of the manager. A hedge fund using such a strategy proceeds from the fact that the market cannot assess the current situation correctly, its asset valuation is irrational, and B. Graham and W. Buffet adhered to the same investment concept. [46]

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It assumed that hedge funds adhering to the Event-Driven strategies do not depend on the market movement, since their profit does not depend on properly made expectations about the price, but their actions upon the fact. Examples of such events are mergers, takeovers, bankruptcy, political events (trade war, war), etc. 3) Macro: managers using a macro strategy, when forming an investment portfolio, assess the macroeconomic situation; assess the movements of entire classes of assets or markets. As a rule, interest rates, currency prices, government policies, inflation rates, and commodity prices tracked to predict trends in global markets. The nature of such investments considered as changeable and highly risky, since the macro strategy implemented in a complex structured environment, which includes many factors affecting prices. In addition, macro strategies include investments in emerging markets. 4) Relative Value: the relative cost strategy designed to minimize risks, benefiting from price inefficiencies. Such a strategy buys undervalued securities, and sells, by opening a short position, overvalued assets. Arbitrage involves multiple short-term intraday deals, in the case of hedge funds with large amounts; the disadvantage of this strategy is the inability of the market to respond to the positions of hedge funds due to large amounts of hedge fund transactions. Therefore, in practice, such a strategy used in conjunction with another fundamental strategy, reducing the risks from investments in the long term. Arbitrage is implemented over a short period with relative price neutrality using mainly technical analysis (analysis of the schedule, volumes and deals tape), but the very reason for using such a strategy is to distrust the long-term behavior of the market. In addition, arbitration allows you to control transactions to the greatest extent in comparison with other strategies. 5) Multi-Strategy: one of the most common among hedge funds strategy, which involves the use of two or more strategies, their combinations. 6) Fund of Funds: a strategy for investing in funds to diversify a portfolio and reduce risks. A manager can allocate multiple funds in one, similar strategies, or multiple funds in several strategies. At the same time, the advantage of this method of hedging risks is its low required investment and low costs for premiums to managers, for example, index funds. These strategies used in various ways, in various combinations, at the discretion of investment (portfolio) hedge fund managers.

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3 Hedge fund strategies Hedge funds can use three types of strategies: corporate, business and investment, more in details presented in table 3.1. Practically industry freshmen could have only investment strategy and by level of experience hedge fund can build a business strategy and then corporate. Moreover, every company has in any form these strategies, because it is not just list of actions, strategy is a concept of actions oriented to global purposes of company. Strategic management designed to manage the actions and plans of the company to achieve the main goal, to achieve success. To do this, the plans and actions of the company must be in harmony, move in the same direction. Investment funds can have three strategies that determine the line of conduct and guide the actions of employees. The presence of all three strategies and the observance of basic ideas in everyday work will ultimately lead to the achievement of the goals of the organization. Hedge funds, in turn, are narrowly targeted investment companies; their competition is the financial market is a large capital competition market. Thus it can be concluded that when creating a company, HF chose the industry where they will compete, answering the main corporate question strategies, respectively, they need to develop a business strategy that determines exactly how they will successfully compete and an investment strategy that is more technical in nature but An investment strategy is based on a business strategy, answering the question of how a hedge fund will win over its competitors.

Table 3.1. Strategy types in hedge funds Strategy Characteristics Corporate Includes internal guide and vision of the organization in the industry. According to Grant’s theory, corporate strategy defines the scope of the firm in terms of the industries and markets in which it competes. Corporate strategy decisions include choice over in diversification, vertical integration, acquisitions and new ventures; and the allocation of resources between the different businesses of the firm. Business Answers the question “how to compete” and applies to all actions that prescribe behavior in relation to interested parties (investors, other market participants, competitors, etc.). Competition strategy in the industry depends on the competitive advantages of the organization, characteristics of competitors, etc. Investment It contains investment strategies depending on the time, amount, nature of intensity and goals. Alpha and beta (active and passive) strategies, basic and complementary (hedging).

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The following theories related to strategic management help explain the underlying reasons for hedge fund activities and evaluate the strategic decisions of managers. Strategic management tools will help analyze past performance with the core strategy and concept of a hedge fund and compare the current situation with the relevance of the strategy in the current environment. Strategic management is a complex discipline, and the stages of development and selection of strategies, as well as change management, chosen for the research.

3.1. Strategy building After understanding which investment approach and strategies hedge fund willing to use managers can build chosen strategies. Firstly, necessary to analyze macro and microenvironment. Macroenvironment is a broad medium outside the industry and markets of an organization that is beyond the influence of an individual business but can have a significant impact on the microenvironment (industry and market) in which the business operates. The macroenvironment is exerted by forces from outside the sphere of influence of the organization, and these forces are usually out of control. Changes in the macroenvironment can make a huge difference to an organization, as they affect all organizations in the industry, and sometimes in the markets served by the industry. They can lead to the emergence or disappearance of an entire industry, they can cause markets to expand or shrink, they can determine the level of competitiveness in the industry and much more. Therefore, when developing a strategy, it is important that managers are attentive to actual and potential changes in the macroenvironment and that they foresee the potential impact on their industry and markets. The ability to predict changes and act to use or protect against the macroenvironment can itself become a source of competitive advantage. Changes can itself be a source of competitive advantage. [22] Such analysis required to evaluate chosen investment approach and strategy evaluate these tools for relevance. A business strategy should help identify company’s competitive advantage, and it consists of the following components: According to Chandler’s theory, any strategy consists of three components: [11] 1) Long-term goals. The identification of key long-term objectives concerns the conceptualization of agreed and achievable strategic objectives. 2) Adaptation. Actions in relation to previously taken measures taken to achieve the goals. 3) The allocation of resources refers to the fact that costs will arise related to the actions necessary to achieve the goals. If the course of action does not take support with adequate levels of resources, then the goal cannot be achieved. 20

Microenvironment analysis requires resources analysis, they are necessary for the normal functioning of the organizational process; they divided into four main categories: 1) financial resources - money for capital investments and working capital are own and borrowed; 2) human resources - employees with appropriate qualifications to increase the value of operations and support those who add value; 3) material resources - land, buildings, equipment, inventory for production, etc.; 4) intellectual (intangible) resources - materials that are impossible to see or feel, but which are necessary for continued business success, such as know-how, legally protected patents and licenses, brand names, registered samples, logos, “secret” formulations and recipes, networks of business contacts, databases, etc. Investor preferences affect the success of a manager in the short term. Preferences are broader than returns and imply risk. The fear of the opposite and the safety of following the herd, the attractiveness of gambling and aversion to loss are all prejudices of human behavior that influence the success of a manager. In fact, even if we could identify and quantify what is the inherent quality of a hedge fund manager, short-term results and feedback will still be driving factors in determining the winners and losers in the industry. The information necessary for making an investment decision is not stationary. Limited data and short-term nature make it extremely difficult to detect changes in data. The main characteristics of a hedge fund are their location and strategy. The location describes the “where” the manager trades, that is, the choice of asset classes. The strategy refers to the “how” the manager trades, i.e. how these asset classes used for profit. The style (approach) includes both functions, for example, the global macro strategy combined with investment in bonds. Analysis of investment preferences related to microenvironment analysis, in hedge funds 2 types of investors: 1. Institutional, such as banks, insurance companies, and pension funds. 2. Individual (practically HF managers invest in own funds, so they work with own investment too).

The process of implementing a strategy begins with obtaining the necessary information from a strategic analysis. This information used as input to the process of selecting the most appropriate strategic option.

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1) Implementation involves the restructuring of the resource base of the organization. Does he have the necessary resources in terms of finance, employees, physical resources, and intellectual assets (for example, legal permits) to implement the strategy? 2) The organization will have to bring its structure and culture into such a position that they contribute to a successful outcome. It may be that the structure and culture (for a start) are not entirely appropriate. In such a situation, the management of the organization will need to make any necessary changes. 3) The implementation of the strategy usually includes some internal changes - for example, its culture, structure, systems or resources. Managing internal change can be the biggest management challenge in a strategic process. 4) Implementing a strategy sometimes involves planning to grow or shrink a business. Some strategies involve growth, and this can be achieved through internal or external development, or, sometimes, through joint ventures. 5) Successful implementation sometimes leads to significant changes in the organization's approach to its customers. This puts the issue of product quality at the center. Operational function and product quality are of strategic importance and are often a key area of focus in strategic implementation. 6) One of the most important strategic issues affecting business success is the degree of its internationalization. In some markets, such as the petrochemical, pharmaceutical, airline, banking, and professional education markets, this is one of the most important considerations. 7) Strategic implementation increasingly requires a careful study of how the strategy will affect the internal and external stakeholders of the organization. The social impact of a business (that is, its strategy) is sometimes a matter that requires detailed study during implementation. 8) It is important to understand that the organization’s environment is changing. There may have been some changes in the internal or external environment since the time of the previous strategic analysis and, accordingly, the choice of strategy. Some of these changes may mean that the current strategy is no longer appropriate. It is for this reason that the strategic process never ends. At each stage of implementation, the business must constantly review its environment. Changes in any environment may require a review of the strategic choice and, accordingly, changes in the implementation process.

After analysis of macro and microenvironment manager can build a relevant strategy, in table 3.2. presented classification of main investment strategies to irrational and rational modern approaches 22

Table 3.2 Classification of investment strategies Strategy Description Irrational Rational Event-driven Focuses on profits from corporate events such as + mergers, acquisitions, and bankruptcy Relative value Expects to catch a price difference among similar + categories of securities. Tactical Focusing on macroeconomic events, trends, opening trading/macro unambiguous long and short positions (stocks, debt + securities, commodities, and currencies) Equity Expects to receive profit from opening long and + long/short short positions. Multi-strategy It follows at least two of the strategies presented to + diversify alternative impacts.

Choosing a rational strategy means that manager understands the market movements and able to reduce risks choosing the right position. Irrational strategy choice means – manager do not trust to market and trying to reduce risks through short-term positions, investments and trades made under influence of significant for market and financial instrument price events, also multi strategy choice intended for hedging the risk from market behavior uncertainty.

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II ANALYTICAL PART OF RESEARCH Literature review illustrates complexity of strategy building process in hedge funds, because of requirements to relevant approach, investment psychology, coherence of business and investment strategies. For achieving research purpose – to determine the factors that influenced effectiveness of hedge funds and make recommendations on strategies in a changing environment, after theoretical analysis next methods chosen demonstrated in table 4.1. Besides in table 4.2. presented expectations from chosen research methods. A hedge fund is an alternative investment company which more flexible compared to traditional investment companies. Hedge funds can use high-risk strategies, open short positions, speculate, use derivatives and use high leverage. Each hedge fund able to decide which strategy they want to use depending on their investment approach and its investors. Traditional investment companies use only long positions, not able to use high leverage, not able to speculate and have other limitations to reduce risks.

Alternative Investments

Alternative Asset Classes Alternative Investments Strategies

Real Estate Single Hedge Funds

Private Equity Managed Futures Funds

Commodities

Energy

Fund of Hedge Funds

Picture 4.1 Types of alternative investments

In this research, we analyze hedge funds with alternative investment strategies. Despite they can differ in strategies, investment approach and policy they have common characteristics presented in picture 4.2.

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Common characteristics of hedge funds

Broad range of financial assets Inefficiencies and risk premia as sources of return Absolute return targets Performance fees Co-investment by fund managers

Liquidity restructions of hedge fund investments

Picture 4.2 Common characteristics of hedge funds

Hedge funds are known as requiring expensive fees and co-investment by fund managers, which rises the trust level to hedge fund performance, especially if they often use high risky strategies. Research methods were chosen to reach the aim of the research, considering their possibilities and limitations, they are relevant to characteristics of hedge funds. Analysis of hedge fund strategies starts with data collection from open sources such as official hedge funds’ websites, analytical publications and so on. For external environment analysis where used information from conferences, forums, interviews of hedge fund managers. There for understanding technological agenda were used publications of hedge fund managers who work in hedge funds with primarily use of new information technologies and research of 2016 about forth industrial revolution by Klaus Schwab presented in World Economic Forum. [32]

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Table 4.1. Research methods

External environment analysis Internal environment analysis Identify factors influencing hedge fund results

PESTLE Content analysis Comparative analysis Factor analysis Matrix "probability-impact" SWOT

Analysis to Modern methods of Comparison of investment Correlation and It reveals the influence of It allows you to determine the content analysis will strategies, approaches, the dependence will be significant factors of micro and analyze the factors, political, allow you to explore presence or absence of determined by the macro environment on the future both internal and economic, social, the strategies of hedge business and corporate method, it will allow of the company. external technological, funds, to collect data strategies for classifying determining the 1. How (positively or environment. legal and for factor analysis. [65] hedge funds by strategies relationship between the negatively) can this factor Standard analysis environmental and approaches. return on investment and influence a firm's position? supplementing aspects that may In addition, a comparative the factors selected for the 2. What is the probability of previous analyzes. affect the analysis will determine study presented in the growth of this factor? Can it be business. [21] the differences in research hypothesis. traced? legislation, barriers and 3. How big will the effect of this other conditions of factor be on the firm? business. 4. When the influence of this factor on the organization may weaken? Soon? In the medium term? After a long time? [59]

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Table 4.2 Research methods use expectations

External environment analysis Internal environment analysis Identify factors influencing hedge fund results Factor analysis Matrix "probability- PESTLE Content analysis Comparative analysis (correlation and SWOT impact" dependence) Compare the differences The closed nature of A comparative analysis will It will identify the factors The analysis will allow Following the results in conditions for the hedge funds makes it reveal differences in the significantly and not to determine the of all the analyzes conduct of activities of difficult to access internal work of hedge fund significantly affect the potentials of influence performed and the foreign and Russian official reporting, but managers, the choice of results of the fund. of factors, their results obtained, we hedge funds. this method will make it investment and trading strength of influence, will be able to evaluate possible to fill data gaps. strategies, differences in as well as to assess in hedge funds on a investor relations, and the future the tendency SWOT analysis and in terms of the activities of to weaken or summarize the results hedge funds for the studied strengthen the factors. of the study. factors.

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4 Characteristics of analyzed hedge funds Information on hedge funds submitted for analysis taken from their official websites, analytical and business publications, video recordings of conferences and interviews of the leaders of these hedge funds. For analysis 3 American hedge funds, 1 British, 3 Russian and 1 Russian hedge fund that moved to United Kingdom selected. Such choice for comparison Russian and foreign hedge funds, industry picture.

1 AQR capital management, LLC (U.S.A) Hedge Fund founded in 1998 in New York, now the main office located in Greenwich, Connecticut, USA. AQR Capital Management operates 21 years on market. Number of employees: 1000 people, 45% of which have higher advanced education (including 80 employees with a Ph.D. degree). [5] Assets Under Management $203 billion. Information about strategies is presented on the company's website: https://www.aqr.com/

Picture 4.1. Office locations AQR capital management

Offices located in 10 cities such as Greenwich, Boston, Chicago, Los Angeles; Hong Kong, Bengaluru, Tokyo; Australia; London, Frankfurt.

Table 4.3 Portfolio managers in AQR Capital Management Education Portfolio manager of Name Title level the fund since Michele L. Aghassi Ph.D March 16, 2016 Principal of the Adviser Andrea Frazzini Ph.D., M.S. July 16, 2013 Principal of the Adviser Jacques A. Friedman M.S. July 16, 2013 Principal of the Adviser

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Portfolio managers in this hedge fund have master’s degree and two of them Ph.D (table 4.3), they are 3% of whole company employees, which decide in what financial instruments to invest. Table 4.4 Minimum investment requirements of AQR Capital Management Investment type Class I Shares Class N Shares Minimum Initial Investment $5 000 000 $1 000 000 Minimum Subsequent Investment None None

According to legal requirements minimal investment amount is $1 000 000 but as illustrated in table 4.4 AQR Capital Management requires $5 000 000 for Class I Shares.

2 Bridgewater Associates, LP (U.S.A.) American investment management firm founded by Ray Dalio in 1975. The firm serves institutional clients including pension funds, endowments, foundations, foreign governments, and central banks 44 years. Number of employees 1 700 people. Company products presented in picture 4.2

Products

Pure Alpha Daily Pure Alpha All Weather Major Markets Observations

Picture 4.2 Bridgewater Associates’ products

Corporate culture of hedge fund based on Ray Dalio’s self-made handbook called Principles which was distributed to all employees. Employees complain on difficult work and high stress level in company. The New York Magazine in article of 2011 described the company as the "largest and indisputably weirdest hedge fund" because of its unwavering commitment to "total honesty and accountability" and minute detail in its corporate culture. For example, Dalio encourages employees to do "whatever it takes to make the company great" and emphasizes transparency and openness in its decision-making processes. All meetings are recorded and can be viewed by any employee as long as the meeting topic is not proprietary. In addition, Dalio says that he fosters "an extreme meritocracy of ideas" and asserts that decisions are made about investments without 29 considerations of hierarchy. He says that any employee can respectfully say anything to anyone in the firm, but they must be prepared to be challenged in return. The company's flat corporate structure aims to remove the barriers associated with traditional asset management firms, and qualities like stodginess and risk-aversion are discouraged. In 2016, an employee filed a complaint with the Connecticut Commission on Human Rights and Opportunities, saying that the hedge fund was like a “cauldron of fear and intimidation.”

3 Man Group, Public (U.K.) The company was founded in 1783 and operates 236 years. Man’s Group principles are: 1 – Performance results. 2 – First, foremost and always, we focus on achieving excellent risk-based performance. 3 – Customers. 4 – Our customers are at the heart of everything we do. 5 – Duty. Man Group expect their people to do the right thing and conduct its business with the highest standards of integrity. Good is not enough, they strive to be excellent in everything they do. They strive to be differentiated and original in their thinking working with highly intelligent people. They succeed through talent, dedication, diligence and teamwork. [37] Website: https://www.man.com Hedge fund’s website: https://www.frmhedge.com/commingled-strategies

Picture 4.2 Man group’s strategies

As illustrated in picture 4.2, Man group use multi-strategy, it related to their diversified business structure.

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4 Citadel Investment Group, LLC (U.S.A.) Global financial institution founded in 1990 by Kenneth C. Griffin, operates in market 20 years. Ken Griffin, founder and chief executive officer, their portfolio managers make 30 investment decisions a quarter. Number of employees: 6000 people. Assets Under Management: $32 billion. Offices located in 13 cities such as Chicago, New-York, London, San Francisco, Hong Kong, Dallas, Greenwich, Houston, Dublin, Boston, Shanghai, Toronto, Raleigh. Citadel’s Values: 1-Integrity 2-Winning 3-Meritocracy 4-Learning 5-Extraordinary colleagues

Fundamental Global, multi- Value-oriented equities business manager equities equity business strategy

Picture 4.3 Citadel business structure [43]

Citadel use diversification strategy which includes three investment companies with different strategies as illustrated in picture 4.3.

Table 4.5 Results of 2016 “Great place to work” survey Employees responds % Say colleagues are willing to give extra to get the job done 96 Feel a sense of pride when they look at what we accomplish 92 Say the firm is a friendly place to work 92 Employees say they are proud to tell others they work here 95 Say they feel welcomed when they joined the company 95 Say they are given a lot of responsibility 92

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"Citadel offers engineers and scientists the greatest challenges in high performance computing, machine learning, systems, software development and infrastructure," Squeri said. "From the moment you join Citadel, you are instantly an integral part of our team and are given the support and resources you will need to make an immediate impact.” According to feedbacks presented in table 4.5 Citadel is comfortable for employees’ company with orientation on IT in investments.

5 Hermitage Capital Management, LP British investment fund founded in 1996, operates 23 years on market. Bill Browder and Edmond Safra ex co-owner of Republic National Bank of New York. This company specialized in emerging markets, when established were focused on Russian markets in beginning. When hedge fund actively performed in Moscow, with $4.5 billion AUM they become third large investment fund in Russia. Number of investors – around 6000. Ex-chief Operating Officer - Ivan Cherkasov. Hermitage Capital Management was headquartered in Guernsey, had offices in the Cayman Islands in London and operated in Moscow, Russia. Today Hermitage Capital located in London and still managed by Bill Browder. [14] Its main investment fund, the Hermitage Foundation, was rated as extremely successful after it earned 2697% from 1996 to December 2007. He was recognized by Nelsons as the most successful fund for emerging markets in the world over the five-year period 1996-2001. The Hermitage name themselves an activist of the fund. His main tactics include exposing corporate corruption in the companies she holds, hoping to improve management behavior and reduce the significant discount that corruption has on stock prices. The most famous is that the Hermitage helped to identify several high-profile cases of corruption in the largest Russian company Gazprom from 1998 to 2000. In October 2000, the Hermitage reported that “investors evaluate this company as if 99% of its assets were stolen, the real figure is about 10%." In April 2007, the firm launched Hermitage Global, an activist fund focused on emerging global markets. Since 2015, Hermitage has been working as a hedge fund for a family office in London, returning external capital to investors. The focus of the fund is still on emerging markets. Website http://hermitagefund.com is under construction.

6 VR Global Offshore Fund Ltd. Russian hedge fund founded in 1999 by Richard Deitz, operates 20 years, registered in Cayman Islands, total number of investors – 169. 32

Office location – Dubai, United Arabic Emirates. Minimum investment accepted from any outside investor - $1 000 000. Director – Jeffrey Johnson. Managing company – VR Advisory Services, LLP (UK). Assets Under Management: $1 733 000 000

7 Arbat Capital Management, Ltd Arbat Capital Management is started from the New Kremlin Fund to help wealthy investors from Russia, Kazakhstan and Ukraine select targets that will prosper due to the proper mix of politics and economics. "You need to know well the companies and the politicians in order to pick the right investments," said Arbat managing director Yulia Bushayeva. The fund expected to be functional. Alexey Golubovich – chairman of the board. Oleg Parfenov – director general. Darria Timakova – Investor Relations.

Arbat Capital Management

Arbat Global Arbat Global The New Mineral Fixed Income Kremlin Fund Recourses Fund Fund

Picture 4.3 Arbat Capital Management structure

AUM $150 million. Company was founded in 2006, based in Moscow, Russia. Website http://www.arbatcapital.com is under construction. Arbat Capital Asset Management is a private equity and venture capital investment firm specializing in early stage and buyout investments. It provides its services to individuals, typically high net worth individuals. [52] The company manages accounts for institutional clients, including pension funds and insurance companies. It manages hedge funds, private equity funds, and open-end unit Investment funds as illustrated in picture 4.3

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The firm also provides alternative investments and structured products. It invests in markets of Russia. The firm conducts in house research to make its investments. It is a subsidiary of Arbat Capital Management. [2]

8 Black Kvadrat, SP Anatoly Radchenko, the founder of this hedge fund, graduated from St. Petersburg National Research University of Information Technologies, Mechanics and Optics (SPMU ITMO) with a degree in financial management. In 2009, he founded, together with Roman Vishnevsky and Dmitry Belousov, the company United Traders, which specializes in providing customers with access to the largest trading platforms in Russia, Europe and the USA. In 2013, their team launched the Kvadrat Black hedge fund with an estimated amount of funds under management of $ 100 million. In 2011 and 2012, the trading robot UnitedTraders.com, developed by Radchenko, won the Best Private Investor competition, showing a return of about 8,000 and 5300%. [74] United Traders operates 10 years, Black Kvadrat operates 6 years on market. Website https://unitedtraders.com/ Managers invest own money in Black Kvadrat strategies and 30% of hedge fund assets invested by them. Chosen hedge funds have different level of accessible information, background and positioning. From characteristics we can see common and different profiles. 5 External analysis of hedge funds External environment analysis includes analysis of political, economic, socio-cultural, technological, legal, general environment factors necessary for factor analysis. For such purposes PESTLE and comparative analysis used. External environment consists of factors that are out of funds’ influence, significant changes in external environment changes “game rules” for whole investment industry.

5.1. Investment industry review Investment industry includes many investment organizations such as Mutual Funds, ETF, Index Funds, Hedge Funds, Private Equity companies, also classical financial companies who invest in traditional assets – banks, insurance companies and so on. The demand for hedge funds as alternative investment instruments began with the creation of this type of funds in 1949. Hedge funds grew during the market boom at the beginning of this decade, but because of the 2007 and 2008 credit crises, many of them closed. One of them, Bernard L. Madoff Investment Securities, turned out to be a fraud. As a result, they are subject to increase due diligence. 34

Despite these recent challenges, hedge funds continue to offer investors a robust alternative to traditional investment funds - an alternative that allows higher returns, unrelated to equity and bond markets. As a result, hedge funds are likely to remain here. During the discussion on institutional investment strategy at the Bloomberg Global Business Forum 2018, experts concluded that a 10-year bull market could face a new financial crisis. Mary Callahan Erdos, CEO of JP Morgan Asset & Wealth Management at the Bloomberg Global Business Forum 2018, says: “After the 2008 financial crisis, the money industry experienced a crisis of confidence in financial institutions that move money around the world and lend money, it happened in the crisis of confidence that people keep their cash, everything from bank deposits to money market funds and how they will finance themselves the next day. Total funds for the management of all hedge funds are estimated at $ 3.6 trillion, as of the end of 2018, market share illustrated in picture 5.1 [56]

ASSETS UNDER MANAGEMENT 2018, $ BLN.

American 26% Global markets 56% European 7%

Asian 3% Emerging markets 8%

Picture 5.1 Hedge funds market share by regions in 2018

A decade ago, all focus was on the oil industry but today attention lays on data and tech market. Because of huge investments in tech market progress is develops faster, also, Klaus Schwab made a historical evolution of previous industrial revolutions [32] and admitted of newer revolutions’ growing speed. All this gave to private capital companies powerful tools in data collection, an analysis that gave those best opportunities comparing to public equity markets. This is the important advantage of hedge funds.

Technological competition In terms of trust crisis in financial markets there came quick and significant changes in investment industry from technological side of business. Development of AI programs, use of big

35 data, blockchain boom of 2017 – 2018, digitization of bank system, today – internet banking, pioneer explorer in Russia Oleg Tinkoff, The impact of information technology developments on the investment industry is quite significant. Artificial Intelligence (AI) has affected the process of fraud prevention but has not yet managed the funds. It does seem strange that machine learning, a subset of artificial intelligence that is great for finding patterns and predicting using a variety of data, looks like an ideal tool for a business. However, the well-established “quantum” (quantitative) hedge funds in London or New York often doubt its potential. However, in San Francisco, where machine learning is actively developing, a group of high-class hedge funds using these methods has emerged. Babak Khojat, a co-founder of Sentient Technologies, a hedge fund AI startup, says that staying on their own devices, machine learning methods tend to “retrain”, that is, to find specific patterns in specific data, they are trained in what’s not difficult realizable now in a wide environment. This is especially true of financial data, as he claims, because of its comparative deficit. The time series of stock prices over the decades still contain far less information than, say, image data used to train Facebook to face recognition algorithms. Another San Francisco hedge fund that, thanks to its unusual business model, attracts an even wider circle of specialists, is the company Numerai, founded in 2015, which opened its first fund this fall. It begins with the collection of financial data and then encrypts it beyond recognition. Its chief operating officer, Matthew Boyd, says it turns them into "purely mathematical problems." He then holds two-stage contests for machine learning algorithms that work best with data. About 1200 data scientists participate weekly, competing for virtual prizes (in the fund's own cryptocurrency) in the first round and cash prizes in the second. This structure tends to encourage algorithms that succeed in choosing winners over time. The firm takes the results of the best algorithms, decrypts these results back into the financial data and uses the information to decide which stocks to trade. The Foundation is required to at least crowdsourcing as much as using AI. Cerebellum Capital is one of the hedge funds that advertise its machine-dependent model despite calling itself the human brain. Founded as an arbitration fund in 2008, it began work on a fully managed AI American stock fund in 2016 and started it in April of this year. The foundation uses machine learning to not only analyze data and develop strategies. The classification system, which measures the relative merits of these strategies, is itself driven by machine learning. But people do real trading by following the instructions of the algorithm. However, they work in the long term, so one feature of these new AI funds is already clear. At least in investing, more artificial intelligence does not necessarily mean less of humans. Quantum (quantitative) hedge funds that develop complex algorithms for making trading decisions rely on access to information: market data such as prices and trading volume. But some 36 are now looking for an advantage in new sources. An industry has emerged that serves them and helps them analyze “alternative” data, such as data obtained from satellite images or websites. Winton, a large London fund, highlights Hivemind, a data analysis unit. For funds opening macroeconomic positions by trading in, say, currencies or government bonds, real-time inflation rates (taken from e-commerce sites) or trade flows (according to delivery data) can be better and timelier than the results of national agency statistics. Funds that sell stocks of individual firms can display sales information from satellite photographs of their fleets and purchases at stores based on data acquired from mobile phone and credit card companies, instead of relying on company reports or quarterly earnings reports. and loss. Quandl, the data provider, sells information on the number of Tesla cars sold every day, broken down by each US state. But among the new wave of data providers, there are those who overstep the bounds of legality. John Fange from the Winton San Francisco office says some do not care about privacy. Anoosh Lachin of Aspect Capital, another London-based quantum of the foundation, once offered data from a former employee of the American government who founded the firm to “predict” the statistics published by the agency in which he worked. Jonathan Streeter of Dechert law firm says hedge funds are aware of the risks of potentially suspicious data. The main pitfalls are privacy laws and insider trading rules. The biggest risk is reputation, only egregious violations can lead to fines. In America, a conviction for insider trading requires not only proof that the information is tangible and non- public, but also proof of "debt violation" that it was obtained without the consent of the owner, for example. Since many phone and credit card companies include items in their contracts that allow them to sell information, this condition is rarely fulfilled. In Europe, for proof of insider trading, although no breach of duty is required, the rules are stricter, as confidentiality is much more disturbing. The new pan-European data protection law is backed up by heavy fines. [19] Some funds are looking for ways to explore new datasets without compromising confidentiality. In a pilot project that ultimately was intended to use his trading algorithms, Winton worked with researchers at the University of California at Berkeley to use “differential confidentiality” methods to analyze data sets that Winton considered with caution alone. Differential privacy works by adding noise to the data, thereby hiding personally identifiable information without disrupting the useful functions of the data set. It is already in use by technology firms, including Google and Apple, as well as the US Bureau of Census. The emerging industry is also clearing its affairs. Emmet Kilduff of Eagle Alpha, an alternative data provider, points to the Investment Data Standards Organization, a non-profit organization created earlier this year. Not surprisingly, firms such as Eagle Alpha and Quandl are moving to analysis, and not just provide raw data. Against the backdrop of proliferation, the need 37 to sort the useful from the senseless and the legitimate from the doubtful has never been so relevant. Ken Griffin, founder, and CEO of Citadel in a discussion on institutional investment strategy with Bloomberg, confirmed that hedge funds like Citadel have more opportunities to risk and predict prices during periods of chaos because of their machine learning and AI technologies, this is essentially the difference between hedge funds and other companies in the industry. Mary Callahan Erdos, CEO J.P. Morgan Asset & Wealth Management: “Data makes investors more private and hedge funds wiser, data helps them make the right decisions, know where they are, know how they track.” Artificial Intelligence (AI) - relevance is the intrigue as to whether machines will replace people as portfolio managers. "Robo-advisers" already exist, providing basic financial advice using algorithms that are calculated based on the questions asked. Despite recent advances, many applications in this field of computer science are still in their infancy, and this is especially true when trying to use AI for asset management. We believe that an increase in intelligence (AI), which uses AI to help people make decisions, not make decisions for them, is a real source of value for the industry. One type of AI is machine learning – the use of statistical algorithms and methods to study patterns in large amounts of data. One of the most common commercial machine learning applications is predictive analytics that helps predict future results. While games with artificial intelligence win in games, in practice the real world is much more complicated. Many artificial intelligence systems produce incorrect results, and almost all of them require some additional human intervention - coding and changing the algorithm - to function normally in real conditions. What determines the quality of training is the quality of input. When it comes to getting the best AI outcomes, there are five key conditions for success: 1) a constant environment where the rules are fixed and do not change, 2) the relevant information is digital, quantitative, 3) abundant amounts of data 4) low uncertainty, 5) clear goals. For the asset management industry, IA is a much more important area of science than AI. This allows you to extract information that few people can identify, even if the data are in plain sight. This has tremendous benefits when it comes to fundamental investing. Any fund manager who reviews his investments has access to much useful information about the company - its

38 financial condition, its revenues, its announced management plans. But there are other important things that investors currently do not have access to through traditional channels. The data sets that contain this information are too large and not structured for an investment professional to use conventional methods such as Excel. It is here that AI and machine learning can be useful tools that help transform data into insight to fill a blind zone, thereby increasing the intelligence of a fund manager. However, a separate fund manager will control investment decisions. Global Alternative Fund Survey 2018 conducted a survey: how would you describe the current state of your organization in the use of artificial intelligence to support the investment process?

Chart Title

Do not use AI, not going to use 73% 40%

Do not use AI, but will 17% 31%

Do not use AI 10% 29%

0% 10% 20% 30% 40% 50% 60% 70% 80%

2017 2018

Picture 5.2 Use of hedge funds of artificial intelligence (AI) in the investments of 2017- 2018. In 2017, there was a 200% increase in the use of artificial intelligence (AI) among hedge fund managers and an almost 100% increase in those who expect to use AI soon. Quantitative managers have been at the forefront of this technology for years, but managers of all strategies have been building capacity and using next-generation trading systems and tools. Hedge funds used these opportunities faster, as their investment strategy analysis of large volumes of securities and economic data are more suitable for using software and machine learning as part of the trade analysis and execution process. Further, hedge fund managers are more likely to be further down the technological continuum. During their life cycle, most were able to abandon basic tools such as spreadsheets years ago and used off-the-shelf and patented technology. Unlike most private managers, business cases have not yet been determined to justify investing in AI. We expect that as technology develops, managers are more suited to industry and private equity, becoming more comfortable with its functional abilities, we will see exponential growth as we now see with hedge fund managers. However, at present, many private equity

39 managers continue to move forward on their technological journey and are only moving beyond using basic tools such as spreadsheets. According to April 2019 report of Man Group FRM Article by Keith Haydon (Chairman of Man FRM) and Adam Singleton (Investment Advisor – Head of Equity Long-Short), computers replaced people in the industry and theory of irrational behavior of D. Kahneman is going to become less relevant soon. These reason driving problems across the whole liquid investment universe. If trading decisions now sit mostly with computers, particularly ones which run routine index matching algorithms, then Kahneman’s web of human biases will play a much smaller part in the market pricing, and this, in turn, will leave less investment opportunity for our brilliant pointy heads who supposedly float above these biases. The next iteration is for all this genius to profit from the errors of its own ways, but though there is a certain amount of that going on, it’s a much tougher gig. Nowadays, use of irrationality is not recommended to investors anymore. According to industry analysis there are several changes such as the ending of old investment era where investors of classical school such as Warren Buffet and other supporters of Benjamin Graham market conception [46] based on market irrelevant behavior and fundamental analysis stayed successful in long-term investments. Following Klaus Schwab 4th industrial revolution [32] research conclusions next new technological revolutions speed up and this changes in technologies which collect and analyze data then algorithms that makes trade and investment decisions changed foreign industry within past two years. Then strategies using D. Kahneman human irrationality approach is become less relevant and technological competition is become main agenda and relevant advantage.

5.2. PESTLE external environment audit The main task of the analysis is the audit of the external environment of the company, the research of factors for making strategic decisions. For convenience, we distribute hedge funds on a territorial basis. Fist group is foreign hedge funds: AQR capital management, Bridgewater associates, Citadel, Man group, Hermitage Capital Management. According to methodology of PESTLE analysis we selected factors that can affect profits in the future 3-5 years. 1) Political: 1 trade war China – America, 2 Trump’s policy. 2) Economic: 40

1 possible economic crisis due to consumer credits, 2 Central Bank refinancing rate. 3) Socio-cultural factors: 1 changes in lifestyle and standard of living, 2 the influence of the media. 4) Technological factors: 1 tough technological competition, 2 computer decision-making. 5) Legal factors: 1 tax relief for American businesses and investment industry, 2 Brexit cancellation. 6) Environmental factors: 1 global warming 2 the garbage problem These factors should be rated from 1 – 3. The assessment of the strength of the influence of a factor is a subjective expert assessment. The strength of a factor is estimated on a scale from 1 to 3 where: - the influence of the factor is insignificant: any change in the factor has practically no effect on the activities of the company; - the influence of the factor is moderate: only a significant change in the factor affects the sales and profits of the company; - the influence of the critical factor (high): any fluctuations cause significant changes in sales and profits of the company.

Second group is Russian hedge funds: VR Global Offshore Fund Russia, Arbat Capital Russia, Kvadrat Black.

Therefore, we chose factors that can affect profits in the future 3-5 years, they can differ from foreign because Russian political, socio-cultural, legal and other parameters are different. 1) Political: 1 sanctions against Russia, 2 state intervention in private equity markets (possibility to control consumers’ bank accounts).

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2) Economic: 1 the fall of the value of national currency to USD and EUR, 2 Central Bank refinancing rate. 3) Socio-cultural factors: 1 changes in lifestyle and standard of living, 2 changes in core values. 4) Technological factors: 1 algorithm and big data collecting competition, 2 the risk of algorithm trade strategy stealing. 5) Legal factors: 1 tightening regulation, 2 data disclosure procedures in Russia (Yarova package etc.). 6) Environmental factors: 1 global warming, 2 the garbage problem.

After rating these factors, presented in appendix, table 5.1 for foreign hedge funds and table 5.2 for Russian, necessary to rate possible changes from 1 to 5 as presented in table 5.3

Table 5.3 Factors changes possibility Rating Possibility, % 1 0 – 20 2 20 – 40 3 40 – 60 4 60 – 80 5 80 – 99

1 – minimum possibility to change 5 – maximum possibility to change

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Table 5.16 PESTLE relative influence factors analysis of foreign hedge funds Factors Weight Political Trade war China – America 0,20 Trump’s policy 0,14 Economic Possible economic crisis due to consumer credits 0,13 Central Bank refinancing rate 0,08 Socio-cultural factors Changes in lifestyle and standard of living 0,08 The influence of the media 0,12 Technological factors Tough technological competition 0,45 Computer decision-making 0,60 Legal factors Tax relief for American businesses and investment industry 0,28 Brexit cancellation 0,12 Environmental factors Global warming 0,05 The garbage problem 0,05

Less influence makes on foreign and Russian hedge funds environmental factors. All analysis presented in tables 5.1 – 5.15 in appendix, from table 5.16 we see that most influence on foreign hedge funds from external environment can makes technological factors, then legal factors and political factors.

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Table 5.17 PESTLE relative influence factors analysis of foreign hedge funds Factors Weight Political Sanctions against Russia 0,30 State intervention in private equity markets 0,18 Economic The fall of the value of national currency to USD and EUR 0,10 Central Bank refinancing rate 0,05 Socio-cultural factors Changes in lifestyle and standard of living 0,11 Changes in core values 0,07 Technological factors Algorithm and big data collecting competition 0,24 The risk of algorithm trade strategy stealing 0,20 Legal factors Tightening regulation 0,10 Data disclosure procedures in Russia (Yarova package etc.) 0,12 Environmental factors Global warming 0,05 The garbage problem 0,05

From analysis of Russian hedge funds external environment, we see that Political factors can be most influence barriers then technological and legal factors also can significantly influence on Russian hedge funds’ performance. PESTLE analysis shows influence of political, technological and legal factors from external environment on foreign and Russian hedge funds. Such results apply on research’s objectives in part of these factors importance.

5.3. Comparative analysis of hedge funds’ regulation Hedge funds accept investments only from qualified or accredited, that is, from large investors, such as banks, pension funds, insurance companies, as well as private investors with experience or high income. In connection with the main purpose of hedge funds - the use of all opportunities to increase the profits of investors, the company was taken to register in areas with preferential taxation (Caymans, British Virgin Islands, etc.), which is optimal from the point of view of reducing costs. However, this does not prevent them from carrying out their activities in countries such as the USA, Great Britain, etc., traditionally demanded by investors and experts in financial markets. In table 5.3 presented regulation comparison in Russia, America and United Kingdom.

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Table 5.3 Regulation comparison Russian Federation U.S.A United Kingdom Legislation Federal Law of Investment Advisers Act of European legislation that November 29, 2001 1940. Qualified clients: The potentially applies to hedge fund No. 156-FL “On Investment Advisers Act of managers, and that requires Investment Funds”. 1940 Rule 205–3 defines a careful navigation, includes: FSFR Order No. 08- Qualified Client as; Investor -Directive 2014/65/EU on 19 / pz-n “On may be one of certain high- markets in financial instruments Approval of the level employees of the (MiFID II). Regulation on the investment adviser. For SEC -Regulation (EU) 236/2012 on Composition and registered hedge fund short selling and certain aspects Structure of Assets of advisers to charge an of credit default swaps (Short Joint-Stock incentive or performance fee, Selling Regulation). Investment Funds and the investors in the funds -Regulation (EU) 2015/3565 on Assets of Mutual must be "qualified clients". securities financing transactions Investment Funds”. Hedge funds and their reporting (SFT Regulation). Investors should have managers are governed by the -Regulation (EU) 648/2012 on minimum $1000 000 anti-fraud provisions of the OTC derivatives, central to apply to hedge Act even though the securities counterparties and trade funds or relevant are not registered under the repositories (European Market market experience. Act of 1933. Hedge funds Infrastructure Regulation), raise funds through private including the Regulation's placement and offer their margining, risk mitigation and securities solely to accredited clearing requirements relating to investors. An individual over-the-counter (OTC) and person with a minimum net exchange-traded derivatives, and worth of $1,000,000 or a accompanying regulatory minimum income of technical standards. $200,000 in each of the last two years and a reasonable expectation of reaching the same income level in the current year is said to be an accredited investor. Regulators FSFM - Federal SEC - The United States FSA - Financial Service Financial Markets Securities and Exchange Authority [33] Service [75] Commission

An important aspect when setting up a hedge fund in Russia is that the vehicle does not have to be licensed on the local market to perform financial activities. Still, the investors will need to register with the Central Bank of Russia. Freedom of hedge funds is the ability to use all financial levers to obtain multiple profits, but this, in turn, carries the risks of possible serious losses for investors, as well as for the entire market, as hedge funds can open positions for significant amounts, thus they have the opportunity, by taking risks, to influence prices and the market. Another drawback can be considered the lack of requirements for compliance with legislation on countering the legalization (laundering) of funds through offshore zones.

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An example of the Magnitsky case when disagreements arose over the ambiguity of regulation over the suspicion of money laundering (laundering), and a criminal case was initiated under Part Two of Article 199.1 of the Criminal Code of the Russian Federation on tax evasion on a large scale, as a result, issues related to Magnitsky were considered in 10 separate criminal cases. From comparison we see that each countries laws and regulations were made by historical experience. For example, American regulation has requirements that helps to avoid “freshman” mistakes, qualifying investor as partner hedge funds get tax benefits. European regulations seem more bureaucratic and Russian regulation considered experience of other countries and made minimum necessary requirements. Even if regulations look similar there are differences in industries. Industry includes people involved in this industry and western society is more experienced in investment question, so if western countries controls hedge funds by law, through regulators and experienced society, Russia controls just by law and it is a big difference that influence on industry and performance.

Political factors All regulation decisions coming from political agenda of country and world industry. That is why important to understand political side that influence on hedge fund business. Mr. Griffin says that we are in a period of great growth in the United States, the Trump tax reform – giant driver to the financial market and corporate America. All these reforms pushed growth up by at least 1-2%, also these reforms driven unemployment almost to the boundaries. Trump’s policies whether it’s deregulation or tax reform certainly pushing corporate to keep growing. Mr. Griffins believe that market has around 18-24 months just on the wave of the Trump’s policies. According to Man Group article, computer’s decision-making changing the industry and they are going to stay, they say that this is the ‘end of history’ of the monetary policy regime and altogether end of thinner ice. In this situation Central Banks like to keep things nice and stable. But changes already happening in day to day trading and investing processes. Under pressures build for seismic change, Central Bank responses become less intuitive, less robust and more extreme until in the end there is a quake, and everything falls over for a while. Things were ever thus. The managed exchange rate regimes of the ERM and Asia as recently as the 1990s were a very formal instance of this, with their periodic busts, most notably in 1997. This grand process is cyclical. The growth sub cycle now is just turning up again: leading indicators are recovering, while a series of Chinese stimulus measures have yet to bite. Meanwhile, US unemployment claims are at 50-year lows and with Trump looking for his second term, fiscal policy is unlikely to be 46 restrained. Right now, inflation is dipping, but oil is higher, and it is much less clear how this story all plays out later in the year. So, we are approaching a crunch point, the like of which we have not seen in the last decade: something will have to give. Is this really a good time to bet that it is the computer and not monetary policy at the heart of our value and momentum drought? Another issue is – trade war between America and China, this situation making a difference in previous long-term familiar picture of markets and makes them uncertain. In 2018 we remember quick and significant corrections in Asian market and S&P index correction in the end of the year. All these significant instability and corrections were coming together with political news about Trump’s policy, his relations with old house and trade war with China. All these events influenced assets prices, especially IT industry shares prices. If look to Russia, main issue for hedge funds is still sanctions started from H.R.6156 - Russia and Moldova Jackson-Vanik Repeal and Sergei Magnitsky Rule of Law Accountability Act of 2012 and then events related to International sanctions during Ukraine crisis. Even if foreign and Russian issues look different they influence on both sides, because trade industry today is global and if you stopped work with one country you involve other participants and it make complicate business, international trade and relations as result, but in market economy model it calls a competition. External analysis shows global picture of industry including main factors that influence on industry and financial markets. Markets consists of buyers and suppliers and general trade rules based on own interests of each, on this relation external factors influences.

6 Internal analysis of hedge funds Internal analysis necessary to understand why hedge funds act as they do, to understand that we will analyze their strategies such as corporate, business and investment. Difference between analysis of external and internal environment based on data access. External environment data ahs an open character, internal environment data has more closed character especially data about corporate and business strategies, that is why we will use content analysis to fill the gaps and using collected data we will build their strategies according to Chandler’s theory of strategy components.

6.1. Hedge Fund Strategies: content and comparative analysis As a rule, investment strategies ranked according to the level of subjective assessment and confidence in stability, market patterns, the level of information required for decision-making and other factors. For the research were selected hedge funds with the highest indicator of the parameter – assets under management as of 2018 from the ratings, as well as several funds with 47 different approaches to investing. Such choice of analyzing hedge funds will give to research complete picture closer to real situation. In each hedge fund we are looking for analysis next elements: 1) Investment strategy. 2) Investment approach. 3) Business and corporate strategy: -long-term strategic objectives, -the actions taken to arrive the object, -the allocation of resources – action’s costs (financial, human, physical, intellectual resources), - an investor’s role.

1 AQR capital management AQR capital management makes an investment choice based on quantitative data, events and fundamental analysis, thus their approach to investment can be assessed as trustworthy to the market, the risks are covered by arbitrage transactions and event driven strategy. The investment approach has a high level of market confidence, corrections and differences in expectations and results; they explain the historically formed volatile nature of the market. Diversification can characterize as a desire to get into the sample of probability. AQR capital management describes its approach as “low-risk in the long run”, which is achieved due to the wide diversification and long-term nature of investment. The strategy selection method is to manage the portfolio as diversified and balanced as possible, starting with weighing with equal risk as a baseline and then making small tactical tilts around the distribution of strategic risk when we find strategies attractive or unattractive. Because they trade in these markets every day and since all strategies are managed in one portfolio, there is discipline regarding rebalancing, to remain deft, using tactical capabilities and providing effective exposure through netting of positions and transaction costs. [4] AQR capital management multi diversification strategy consisting of nine strategies which can be classified: 1) Macro - long-term, based on macroeconomic fundamental analysis and economic theory. Investments in emerging markets. 2) Event driven 3) Relative Value - arbitration, based on short-term strong price movement under the influence of events, 4) Equity Hedge 48

Table 6.1 AQR capital management strategies content analysis Unit of analysis Evaluation indicators Total number Investment approach Identifies investment approach as quantitative 1 Business strategy Investors mention Colleagues 1 Clients 2 Technological and research Research 1 development Technologies, programs 1 Corporate strategy Diversification 1

According to content analysis AQR capital management identifies their investment approach as quantitative, identify investors more as clients but part of investors are colleagues. 1) AQR capital management uses 3-Alpha strategy. These strategies differentiate by recognizing the inherent risks and opportunities that come with global equity investing. They pair our Enhanced Strategy alongside dedicated country and currency models for integrated alpha opportunities. 2) Fixed Income strategies. Multi-factor investment approach, harnessing underlying drivers of performance, generates excess returns that are uncorrelated to other asset classes as well as traditional fixed income managers. 3) Absolute Return Credit strategy. A market neutral credit strategy that seeks to deliver positive absolute returns with low correlations to traditional equity and credit markets. It does this by investing both long and short in a diversified portfolio of corporate credit and equity. 4) Emerging Markets Strategy. Seeks excess returns through country, maturity, and currency selection across hard currency and local currency markets. While the strategy includes local currency investments, it takes no beta to local currency debt, engages in no overall duration or spread timing, and targets a beta of one to its hard currency benchmark. 5) Global Governments This strategy seeks excess returns through country, maturity, and currency selection. It engages in minimal duration timing. 6) Tax-Advantaged Equity Market Neutral: seeks to deliver alternative strategies with a focus on being tax-efficient and potentially tax-beneficial across an investor's entire portfolio. Institutional Investment Vehicles: they serve institutional investors—including pension funds, defined contribution plans, insurance companies, endowments, and foundations—with a range of vehicles to suit to their organization’s governance, pricing and liability needs. From “Shareholder Letter”:

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Good strategies can have very tough years without being broken. We continue to believe 2018 was such an instance. All the reasons, risk-based and behavioral, why we have expected our investment ideas to work over the long run – across geographies and market caps and in our live experience over roughly 20 years – remain applicable today. We remain confident in a recovery, though the path there may not be a straight line.

2 Bridgewater associates Investment philosophy of hedge fund based on Ray Dalio’s handbook called Principles. Bridgewater Associates is a "global macro firm". It uses "quantitative" investment methods to identify new investments while avoiding unrealistic historical models. Its goal is to structure portfolios with uncorrelated investment returns based on risk allocations rather than asset allocations. Additionally, the company is reported to accept funds from only institutional clients such as pension funds, foundations, endowments, and central banks rather than private investors. [9] Hedge fund accepts investments only from institutional investors since 2006: pension funds, endowment funds, central banks, etc. The strategies of this fund are divided into beta and alpha investments. Beta investments - return on investment is achieved by passive management and includes standard risks. Alpha investment - the purpose of such an investment is to obtain high returns, through active management. Founder of Bridgewater associates Ray Dalio in 1990 introduced this investment concept. Pure alpha consists of 30 – 40 trading positions in bonds, currencies, stock indices and commodities to avoid the concentration of assets in one sector. Separation of alpha and beta The company divides its investments into two basic categories: (1) Beta investments, whose returns are generated through passive management and standard market risk. (2) Alpha investments, whose goal is to generate higher returns that are uncorrelated to the general market and are actively managed. The principle of separating alpha and beta investments was introduced by Dalio in 1990 and gained the recognition of other equity managers beginning in the year 2000. The firm is reported to be the first hedge fund manager to separate alpha and beta investment strategies and offer dedicated investment funds for each.

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Table 6.2 Bridgewater associates strategies content analysis Unit of analysis Evaluation indicators Total number Investment approach Identifies investment approach as behavioral 1 Business strategy Investors mention Colleagues Clients 1

From content analysis we see that Bridgewater associates uses behavioral investment approach, identifies investors as clients because most of them are institutional.

3 Man group Man group is an old huge company in financial sector and their hedge fund is a part of their business. Considering their structure their corporate strategy presented in picture 6.1 – diversification of resources to several companies. [36] Man group’s hedge fund – FRM provides a diverse range of strategies across investment approaches, styles, and asset classes.

Man Group

Diversified Quantitative Discretionary fund Ocuses on assets quantitative Hedge fund equity manager (alternative within private investment investment manager and long-only markets. manager specialist strategies, equity and N/a on public credit markets.

Picture 6.1 Man group diversified structure

Each company ruled by experienced manager and strategies selected by their preferences and understanding of markets. Hedge fund – FRM uses 6 multi-strategies strategies according to classification of hedge funds by strategies. For identifying business strategy and investment approach, content analysis used.

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Table 6.6 Man group’s FRM strategies content analysis Unit of analysis Evaluation indicators Total number Investment approach Identifies investment approach as behavioral 1 Business strategy Investors mention Colleagues 1 Clients 1 Corporate strategy Diversification 1

According to content analysis in table 6.6, Man group is a diversified business with hedge fund – Man FRM which uses behavioral investment approach, identifies investors as colleagues.

1) Customised Diversified target strategy consists of relative-value, credit, equity long- short, alternative risk premia, global macro and overlays as presented in picture 6.2

Picture 6.2 FRM Customised Diversified target strategy allocations

This strategy performance presented in table 6.5 by ROI in 2014-2018.

Table 6.3 FRM Customised Diversified performance by calendar years 2014 2015 2016 2017 2018 2.9% 0.6% -0.2% 5.5% -4.2%

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2) FRM Diversified strategy consists of relative-value, credit, global macro, alternative risk premia, equity long-short and overlays as illustrated in picture 6.3

Picture 6.3 FRM Diversified target strategy allocations

The strategy performance presented in table 6.4 by ROI in 2014-2018.

Table 6.4 FRM Diversified performance by calendar years 2014 2015 2016 2017 2018 2.2% 1.0% -5.0% 4.2% -5.8%

3) FRM Emerging Markets is a concentrated, multi-manager portfolio providing access to parts of the global economy that we believe offers superior growth over the longer term compared to developed markets. The key features of the strategy are: Portfolio of local and international managers with a diversified mix of asset class exposures (Equity, Credit, Rates, FX). Potential to exploit idiosyncratic opportunities in emerging markets because of a diverse set of economic and political developments, as well as participate in market trends found in key emerging market countries. 4) FRM Equity Alpha strategy is a high conviction strategy with over 15 years’ experience investing in and researching top statistical arbitrage managers Targets optimal long-term performance through a combination of forecasts of volatilities, correlation assumptions and risk/reward expectations. Aims to provide low correlations to traditional assets classes such as stocks and bonds. Aims to maximize sources of diversification with a minimum number of holdings. Exposure to high-quality managers that are otherwise closed to external investment. The strategy performance presented in table 6.5 by ROI in 2014-2018.

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Table 6.5 FRM Equity Alpha performance by calendar years

2014 2015 2016 2017 2018 7.5% 7.6% -8.3% 8.8% -0.3%

5) FRM Event Equity & Distressed Strategy is a concentrated multi-manager portfolio providing access to the spectrum of event driven equity and credit strategies. Man FRM has over 20 years’ experience allocating to Event Equity and Distressed strategies. The key features of the strategy are: Diversified across equity and credit markets, including activism, merger arbitrage, catalyst- driven special situations, and distressed investing Seeks to allocate to smaller, specialist manager who have a track record in both Credit and Equity Investing. Focuses on managers seeking asymmetric returns relative to risk employed with a focus on capital preservation. Aims to generate equity-like returns that are differentiated from a traditional long-only portfolio. 6) FRM Global Equity Long Short strategy is a concentrated portfolio of equity long-short managers with different investment styles and geographies. Man FRM has extensive experience in Equity Long-Short investing since 1998. The key features of the strategy are: Aims to capture equity market upside driven by stock selection, while seeking to preserving capital on the downside through active risk management. Seeks to produce comparable or better returns than long-only strategies, with less risk Invests in concentrated strategies focusing on what we view as the manager’s specific skill advantage. Underlying managers tend to be nimble and flexible, thus in our view have greater potential to capitalize on time-sensitive opportunities. Focuses on high conviction, flexible managers who have the potential to capitalize on long- short equity opportunities while seeking to mitigate concentration risks that arise from investing with a single manager. 7) FRM Global Macro Strategy is a concentrated multi-manager portfolio that offers access to a potentially diversifying, risk-adjusted return stream through a blend of highly liquid, directional, multi-asset class managers. Man FRM has extensive experience in Global Macro investing since 1998. The key features of the strategy are: 54

Aims to provide low correlation to traditional asset classes with positive skew and optionality in exposure. Focuses on liquidity using most liquid market instruments (i.e. swaps, forwards, futures). Seeks to preserve capital in down equity months as managers can scale in and out of trades and look to cut risk quickly to limit outsized downward moves. Designed to provide diversification in environments of increasing uncertainty about equity valuations and higher interest rate volatility. Invests in a comprehensive mix of fundamental and quantitative strategies in both developed and emerging markets, attempting to capture trading opportunities from different angles. FRM Managed Futures The FRM Managed Futures Strategy is a concentrated portfolio of 5-10 managed futures managers with exposure across a range of asset classes, markets and geographies. Man FRM has been actively allocating to managed futures strategies since 1998. The key features of the strategy are: Aims to provide low correlation to traditional asset classes, particularly in times of dislocation and crisis. Offers access to a multi-manager portfolio of carefully selected diversified Managed Futures managers, aiming to mitigate single manager idiosyncratic risks. Seeks identifiable and persistent sources of return, providing exposure across asset classes, markets and geographies. Aims to have a low correlation to price movements in equity markets, especially in times of financial stress and crisis. Potential to provide valuable portfolio diversification in a sustained market downtrend. Markets are increasingly driven by fundamentals, potentially leading to lower correlations which bodes well for trend following strategies.

4 Citadel Citadel invests in companies in the Communications, Consumer, Energy, Financials, Healthcare, Industrials, Media and Entertainment, and Technology sectors. Participating in thousands of company meetings annually across the globe, we believe in engaging with the companies we analyze and invest with. [12] The multi-strategy of this hedge fund consists of the following strategies: 1) a macro strategy focused on obtaining fixed profits by predicting the macroeconomic situation for the purchase of futures. 55

2) Leverage: high-risk strategy. Surveyor uses fundamental strategy based on financial analysis (quantitative). Ashler Capital uses sector-focus approach based on financial analysis. Citadel Gloval Equities uses alpha strategy focused in sectors.

Table 6.6 Citadel strategies content analysis Unit of analysis Evaluation indicators Total number Investment approach Identifies investment approach as quantitative 1 Business strategy Investors mention Clients 1 Technological and research Research 1 development Technologies, programs 1

From content analysis presented in table 6.6, Citadel’s investment approach is quantitative, investors are clients and they do researches for technological development to improvement of their quant strategies.

5 Hermitage Capital Management From this hedge fund’s director interview In Russia they invested in natural resource companies as Gazprom, Surgutneftegaz, Transneft, also in Sberbank etc. In 2006 Hermitage Capital Management sold all Russian assets.

Table 6.8 Hermitage Capital Management strategies content analysis Unit of analysis Evaluation indicators Total number Investment approach Identifies investment approach as behavioral 1 Identifies investment approach as quantitative Business strategy Investors mention Colleagues 1 Clients 1

From content analysis presented in table 6.8 Hermitage Capital Management use behavioral approach, identify investors as colleagues and clients. Their strategies focused on emerging markets.

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6 VR Global Offshore Fund VR Capital Group to build an asset management business focused on distressed debt investing. VR Capital Group investing into countries undergoing high levels of macroeconomic stress and working with sovereign and corporate debtors to restructure their balance sheets and regain access to capital markets. The company use macro strategy and emerging markets strategy, firstly invested in Russia after crisis 1998 then invested in Argentina following the sovereign default and currency devaluation in 2001 and invested in Greece in 2012 and Ukraine in 2014.

Table 6.9 VR Global Offshore Fund strategies content analysis Unit of analysis Evaluation indicators Total number Investment approach Identifies investment approach as behavioral 1 Business strategy Investors mention Clients 1

From content analysis presented in table 6.9, VR Capital Group known in Russia as VR Global Offshore Fund use behavioral investment approach, identifies investors as clients. VR Capital Group use macroeconomic stress to gain profits and help countries according to global macro and emerging markets strategies.

7 Kvadrat Black Fund SP Hedge fund uses quantitative strategies related to computer algorithms. Kvadrat Black is a part of United Traders business, corporate strategy is diversification. [53]

Table 6.10 Kvadrat Black strategies content analysis Unit of analysis Evaluation indicators Total number Investment approach Identifies investment approach as behavioral 1 Identifies investment approach as quantitative 1 Business strategy Investors mention Colleagues 1 Clients 1 Technological and research Research 0 development Technologies, programs 1 Corporate strategy Diversification 1

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According to content analysis presented in table 6.10, Kvadrat Black uses both behavioral and quantitative approaches. But to clarify, they use behavioral approach for other businesses, for Kvadrat Black they use quantitative approach. As known traders started together and still invest in Kvadrat Black, so investors identify as colleagues and clients. They develop computer programs for arbitrage.

8 Arbat Capital The company’s investors: pension funds and insurance companies; individual clients. Alternative investments focused in markets of Russia.

Table 6.11 Arbat Capital strategies content analysis Unit of analysis Evaluation indicators Total number Business strategy Investors mention Clients 1 Corporate strategy Diversification 1

From content analysis of Arbat Capital presented in table 6.11, fund identifies investors as clients, use diversification corporate strategy. Investment strategy is emerging markets and focus on energy assets.

6.2. Comparison of failed vs. successful funds by strategies In this comparative analysis, presented in table 6.12, ROI data in 2014 – 2017 collected from four hedge funds, others do not present because they do not get any access to financial information.

Table 6.12. Hedge fund’s ROI, 2014-2017 Approach and ROI, % Hedge Fund strategy 2014 2015 2016 2017 Total Quantitative, AQR capital management [5] 5,93 17,59 5,85 5,83 35,20 alpha Bridgewater associates [10] Behavioral, alpha 96,90 3,34 2,00 1,25 103,49 Behavioral, beta Man group 15,80 7,50 -12,50 15,20 26,00 and alpha Quantitative, Kvadrat Black 24,21 35,83 4,70 16,01 80,75 alpha

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From Comparison of hedge funds ROI’s and strategies we can conclude that in 2014 – 2017 best results show Bridgewater associates with 103,49% ROI used behavioral approach and alpha strategy, then Kvadrat Black shows 80,75% used quantitative approach and used alpha strategy. AQR capital management and Man group show around 30% ROI it is equal to bank deposit returns.

7 Identify factors influencing hedge fund results 7.1. Factor analysis: correlation The analysis will help to identify factors which influenced on hedge funds’ performance in 2014 – 2018. For research purposes factors separated to foreign and Russian categories, for results’ comparison. We took influence weight from PESTLE analysis in technological, regulation, political factors. As for behavioral approach use and investment participation we gave them rate from 0 to 100 % to keep equality of measurement with other factors. Percentage choice based on main element – ROI.

Table 7.1 Main components of analysis by factors Y x1 x2 x3 x4 x5 Behavioral Investor’s ROI Technologies Regulation Political approach participation 35,2 53 2 17 0 100 103,5 53 2 17 100 50 26 53 2 17 100 100 80,75 22 11 24 0 100

Table 7.2 Pair correlation of factors

y х1 х2 х3 х4 х5 y -0,35 0,35 0,35 0,11 -0,76 x1 -1 -1 0,58 -0,33 x2 1 -0,58 0,33 x3 -0,58 0,33 x4 -0,58 x5

According to methodology only X5 factor significantly influence on ROI – the less participation of investor – the higher ROI.

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7.2. Matrix "probability-impact" For risks analysis we will list factors that affects on hedge funds performance: A. Technological: losses from technological competition. B. Regulation rules changes. C. Political prohibitions. D. Irrationality of market leading to losses in investments. E. Managers not invests in their fund and care about commissions not profits for investors.

Table 7.3 Likelihood level Likelihood level Score, % Very low 0 – 20 Low 21 – 40 Medium 41 – 60 High 61 – 80 Very high 81 – 100

Using table 7.3 we classified factors by probability from 0 to 100 (from low to high) probability.

Table 7.4 Model of probability and impact classification Probability classification Score Impact classification Score Low 1 Major 3 Medium 2 Medium 2 High 3 Easy 1

We rated factors according to table 7.4 Model of probability and impact classification and get them scores according to table 7.5 Impact analysis. All ratings and scores presented in table 7.6 Calculation of the exposure risk.

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Table 7.5 Impact analysis Magnitude of impact Impact definition Score Rating High impact / High probability Very high – they are the biggest risks that 5 A entrepreneurs should pay attention. High impact / Medium probability High - these risks have either a high probability of 4 B Medium impact / High probability occurrence, or a significant impact. Medium impact / Medium - there is a medium chance that 3 C Medium probability the risks appear noticeable impact. Medium impact / Low probability Low - these risks can occur in some situations and 2 D Low impact / Medium probability have a low to medium impact. Low impact / Insignificant - there are risks with low probability 1 E Low probability of occurrence and low impact. Can therefore be neglected.

After all procedures we filled table 7.6 Calculation of the exposure risk for level of risk identification.

7.6 Calculation of the exposure risk Occurrence Degree of Impact № Risk likelihood risk Probability Score Probability Score Rating

Technological: losses from technological 1 Very high 81 Very high 5 A competition.

2 Regulation rules changes. Low 30 Low 2 D

3 Political prohibitions. Medium 50 Medium 3 C

Irrationality of market leading to losses in 4 High 70 High 4 B investments. Managers not invests in their fund and 5 care about commissions not profits for Very low 10 Medium 3 C investors.

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Table 7. 7 Probability impact Matrix IMPACT

Low Medium High (insignificant, (reasonable impact, (will have a just note) to be monitored) significant impact) Low (unlikely to occur) E D C Medium (may occur at a time) D C B

LIKELIHOOD High (likely to occur) C B A

The analysis of matrix shows: 1) that the risk of losses from technological competition is a risk class A 2) risk of losses from market irrationality is a risk class B 3) risks of political prohibitions and managers greed is a risks class C 4) regulation rules changes is a risk class D.

7.3. SWOT This analysis will help to compare foreign and Russian hedge funds for understanding SWOT positions to make recommendations.

Table 7.2 SWOT analysis of foreign hedge funds Strengths Weaknesses Level of engagement in the industry. Under “pressure” of trends Reputational advantage in place. Opportunities Threats High dependence from political and Pioneer, explorer advantages. industry’s society influences.

Foreign hedge funds perform in an experienced industry and has own controls in addition to law and regulator.

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Table 7.3 SWOT analysis of Russian hedge funds Strengths Weaknesses Less competition. Level of engagement in the industry. Less “official” requirements, commercial Reputational advantage in place. information sharing. Opportunities Threats Become one of pioneers of industry (Black Possibility of government threats (Hermitage Kvadrat example) Capital Management case) [41]

From SWOT analysis of foreign hedge funds and Russian, we can conclude that Russian investment industry is going through trends which western industries already passed, Russian investment environment on stage of formation and adaptation. Despite these differences in experience Russian hedge funds because of digitization of industry can jump over stages of natural industry development and show high results as Kvadrat Black for example. In conclusion of analytical part necessary to admit significant changes in effective investment approach from behavioral to quantitative approach, from human decision-making to machine. Klaus Schwab 4th industrial revolution [32] research conclusions are realizing today. From analysis of Russian hedge funds external environment, we see that Political factors can be most influence barriers then technological and legal factors also can significantly influence on Russian hedge funds’ performance. Such conclusions came from historical experience of events happened in Russian hedge fund industry. PESTLE analysis shows influence of political, technological and legal factors from external environment on foreign and Russian hedge funds. Such results apply on research’s objectives in part of these factors importance. From Comparison of hedge funds ROI’s and strategies we can conclude that in 2014 – 2017 best results show Bridgewater associates with 103,49% ROI used behavioral approach and alpha strategy, then Kvadrat Black shows 80,75% used quantitative approach and used alpha strategy. AQR capital management and Man group show around 30% ROI it is equal to bank deposit returns. According to factor correlation analysis only one factor showed significant influence on ROI – the less participation of investor’s – the higher ROI. Such results can be justified by quantitative character of research.

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According to results of the analysis of matrix “probability-impact”: 1) That the risk of losses from technological competition is a risk class A - the biggest risks that managers should pay attention. 2) Risk of losses from market irrationality is a risk class B - have either a high probability of occurrence, or a significant impact. 3) Risks of political prohibitions and managers greed is a risks class C - is a medium chance that the risks appear noticeable impact. 4) Regulation rules changes is a risk class D – risks can occur in some situations and have a low to medium impact.

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III PRACTICAL PART OF RESEARCH In this part of the research recommendations for hedge funds are presented. 1) The investment industry is going through significant changes related to technological revolution, according to analysis of external environment foreign hedge funds already know that news, Russian hedge funds vary in understanding and using this information. Those hedge funds who still use classical strategies ignoring new opportunities, those who invest in resource sector and government corporations should pay attention to fundamental changes not only in investment industry but in many levels of economic and human life called digitization. They can start researching this topic and order trading algorithms from IT specialists. Such decision will simplify routine of relative value arbitrage strategy and bring higher returns in addition to main strategy. 2) Russian hedge funds should orient on high standards of investment community engagement level and adapt digital sharing business model from foreign colleagues as it did already Kvadrat Black. Managers of this hedge fund regularly participates in conferences, forums, share their expert opinion and analytics through YouTube, digital magazine – UT Magazine and they develop their business fast. Applying to minimum regulation requirements does not mean it is good for business. 3) Russia today is forming an open line of business, international cooperation and development through joint research and projects development. Hedge funds as investment companies with huge opportunities should be ahead of the trend using financial resources and being involved in the international investment environment, attract investment in the Russian economy. Previously, funds were invested only for large resource projects and companies. Today investors can invest in successfully developing modern businesses such as Internet banking (Oleg Tinkoff), taxi services (InDriver, Yandex taxi), technology companies in the field of cloud computing and the development of artificial intelligence Meil Group and Yandex, and many other companies that could get an acceleration in development through investment. For such purposes Russian hedge funds should evaluate their strategies through actual opportunities that able today and strategically expand their businesses as Man Group for example does.

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CONCLUSION Markets instability under influence of external and internal environment factors makes necessary to understand industry in complex and align their strategies and investment approaches to industry conditions that are changing rapidly. We used research methods to evaluate strategies from various perspectives and modern research methods, electronic resources. With the development of interdisciplinary research in the field of finance and psychology, and then behavioral finance, it became possible to deepen knowledge of the financial market and its participants. Hedge funds’ managers started to use behavioral approaches and strategies in investments but today that situation is changing. In 2019 hedge fund managers from United Kingdom noticed that behavioral based strategies do not work anymore, because most operations on market made by robots (algorithms). With fourth industrial revolution, technologies came to all levels of businesses, especially investment industry modifies and basic investment business rules with that. Such understanding of importance to get into technological competition not spread to all levels of an industry yet. This transitional situation gives a chance to Russian industry rise quickly. On the example of Kvadrat Black who earlier started to use algorithms in their investment strategies we made sure of new came tendency of IT use as basic strategy not for experiment or as addition to traditional strategy. Analysis results shows that hypothesis approved particularly: 1) Technological advantage – approved. According to sources analysis, recent published interview this factor’s influence will rise quickly, and it can become main competitive advantage in market competition of investment industry. 2) Free regulation in comparison with other investment companies – particularly approved. In United Stated of America and United Kingdom this factor makes a good influence, as concluded because they have control of experienced society from the industry. In Russia there is no such social control, then Russian industry is under legal control only. Such situation leads to unnecessary closed business approach as “no information – no problems” which it is an obstacle to the development of the industry. 3) The impact of the political agenda on the investment portfolio formation, as research shows political agenda cannot directly forbid any hedge fund to not invest in country but makes it an extra work. Moreover, political agenda influences on market prices as it was in 2018 during uncertainty about Trump policy, trade war with China when S&P index were significantly changing from news to news.

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For Russia political agenda affected for certain people and made business procedures more bureaucratic for many. 4) Strategies based on the understanding of the irrationality of the market and its participants, have more flexible and independent strategies, which reduces the risk of losses – partly approved. Behavioral approach worked until 2019 and still work in some countries but tendency has changed and from this year quantitative approach based on computer decision-making will perform effectively. 5) Participation of investors in decision-making due to their special status and opportunities - institutional and individual. According to literature review hedge fund investors trust more to hedge funds where managers co-invests, and they will invest for own interest too, but correlation analysis shows dependence of participation and less ROI of AQR Capital management results 35,2% in 2014 – 2017 which is equal to bank deposit yes return and less than market middle results around 12 – 14%. Answering to requested questions: 1. The competitive advantages of hedge funds as participants in the financial market are tax cost reducing opportunities, flexibility to choose any strategy. Moreover, considering to new tendency of decision-making digitization which means the increasing use of arbitrage strategies where short positions often required, hedge funds will increase their advantages in the industry. 2. Difference between Russian hedge funds’ strategies from foreign concerned to industry development speed. Klaus Schwab admitted that next new technological revolutions quicker than previous and countries that are late to adopt previous changes already behind of modern civilized development for 50-100 years. According to his research this difference going to increase year to year. Russian investment industry has a trace of government participation and some hedge funds were created at the expense of funds provided by the “resource needle” and continue to interact with resource companies to develop the resource industry by investing the money received from the government, as shown by the analysis of Russian hedge funds on the example of Arbat Capital Management. On the other hand, Black Kvadrat – hedge fund developed by young traders became successful quickly and still working well. In comparison with other Russian hedge fund which developed from government support and oriented in natural resource assets. 3. Investors in some hedge funds, such as AQR Capital Management, Black Kvadrat co- invest in their funds and directly involved in the strategy development process. On the other hand, Bridgewater associates who accepts investments only from institutes treat investors as clients, not

67 colleagues, but top management still invested in this hedge fund from the start, then still have few colleagues – investors. Before 2019 experts were talking about information technologies advantages and disadvantages, but today they say that more and more market participants are computers (algorithms) and simpler of them use technical indicators such volumes and price changes to decide, also there are more complex algorithms made by offering, unique algorithms that can use different data to decision-making. How this picture can change Russian investment industry? Before technological revolution to successful performance in investment industry was necessary to be in place like financial centers, but now a hedge fund can be located anywhere and using Internet and algorithms have an opportunity to perform as funds that located in London or NYC. The main barriers to the development of the Russian investment market considered: 1-unwillingness of managers to share the results of their activities with stakeholders, the sites of many Russian hedge funds are not functioning, interviews with journalists and researchers are not given, such a closed nature of work undoubtedly slows down the process of industry development, the issues relevant to society and the hedge funds themselves are not consecrated Problems; 2 - the presence of distrust of the Russian industry by a foreign society, this was influenced by several stereotypes emanating from culture supported by a chain of events, as the head of Hermitage Capital Management wrote in his book “Red Circular”, as well as in his interview about the Magnitsky case; 3-gaining new "arms race" in technology, which must be actively involved, to allocate serious funds to gain a competitive advantage. Extract of the recommendations presented in practical part of research: 1) Actively participate in the life of the industry, share own performance results, not commercial information, for example, managers of Bridgewater associates, Citadel and Man Group FRM share on their official website analytical opinions about the current situation in the industry, publish research on the market, etc. Such actions allow potential investors and stakeholders to understand and evaluate the position and policies of the hedge fund, which can help it develop, attract talented people. Also, participate in conferences, interviews, public events. Stay involved in the industry’s life can help share and get advices about new coming advantages in technologies, etc. 2) Develop your strategies, check for relevance, also work on a business strategy, using the example of the Man Group, which has become a brand that embodies the quality of services, their business diversification strategy in a narrow industry brings one of the high profits, they have different structure forms, its research centers, consulting, etc. 68

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APPENDIXES

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APPENDIX 1 GLOSSARY

Alpha Passively managed strategies in HFs.

Beta High risk actively managed strategies in HFs (credit or liquidity risks etc.)

Arbitrage A strategy involving minimal risk, due to short-term transactions, the number of completed transactions achieves the profit.

AUM Assets under management.

Bear market The market is under correction, when the prices of most assets fall.

Bull market Growing market, with overall growth of most assets.

Derivatives Derivatives from basic financial instruments. Financial contracts such as futures, options and various securities that offer “synthetic” access to an underlying asset such as a commodity, stock market, etc. The price movements of a derivative generally follow the price movements of the underlying asset.

Diversification Capital allocation across multiple assets using different strategies to reduce the risk of irretrievable investments.

ETF Exchange traded fund is an investment fund whose shares (stocks) are freely traded on the exchange. Unlike traditional mutual funds or mutual funds, a company that launches an ETF does not work directly with retail investors. The placement of fund units is the same as that of ordinary companies – on the stock exchange. There they also apply, i.e. investors at any time during the course of trading can buy and sell units of such a fund at the current exchange price. This is a fundamental difference between stock funds and ordinary ones, in which depositing and withdrawing money (buying and selling shares) most often takes several days.

HF Hedge Fund.

Leverage The use of borrowed funds in addition to their own, to accelerate the profit.

Long position Buying an asset, if there are positive expectations about the price growth for this asset, the profit achieved by selling this asset in the future. Mutual funds This is a form of collective investment, which allows investors (shareholders) to acquire a share (share) of the fund, thereby obtaining access to its portfolio of assets.

Short position Opening a position for sale without having an asset to sell.

SEC US Securities and Exchange Commission.

APPENDIX 2 PESTLE Analysis of foreign and Russian hedge funds

Table 5.1 PESTLE Analysis of Foreign Hedge Funds Factor Factor Factor Factor Factor Factor influence influence influence Political factors Economic factors Socio-cultural factors Political 1 2 Economic 1 1 Socio-cultural 1 1 Political 2 1 Economic 2 1 Socio-cultural 2 2 Technological factors Legal factors Ecological factors Technological 1 3 Legal 1 2 Ecological 1 1 Technological 2 3 Legal 2 1 Ecological 2 1

Table 5.2 PESTLE analysis of Russian hedge funds Factor Factor Factor Factor Factor Factor influence influence influence Political factors Economic factors Socio-cultural factors Political 1 3 Economic 1 1 Socio-cultural 1 1 Political 2 3 Economic 2 1 Socio-cultural 2 1 Technological factors Legal factors Ecological factors Technological 1 3 Legal 1 1 Ecological 1 1 Technological 2 2 Legal 2 2 Ecological 2 1

Evaluation of foreign factors changes possibility in 3 – 5 years

Respondent 1 Table 5.4 Evaluation of foreign factors changes possibility in 3 – 5 years Factor Factor Factor Factor Factor Factor influence influence influence Political factors Economic factors Socio-cultural factors Political 1 2 Economic 1 3 Socio-cultural 1 2 Political 2 1 Economic 2 1 Socio-cultural 2 1 Technological factors Legal factors Ecological factors Technological 1 4 Legal 1 3 Ecological 1 1 Technological 2 4 Legal 2 2 Ecological 2 1

Table 5.5 Evaluation of Russian factors changes possibility in 3 – 5 years Factor Factor Factor Factor Factor Factor influence influence influence Political factors Economic factors Socio-cultural factors Political 1 2 Economic 1 2 Socio-cultural 1 4 Political 2 1 Economic 2 1 Socio-cultural 2 3 Technological factors Legal factors Ecological factors Technological 1 2 Legal 1 2 Ecological 1 1 Technological 2 3 Legal 2 1 Ecological 2 1

Respondent 2 Table 5.6 Evaluation of foreign factors changes possibility in 3 – 5 years Factor Factor Factor Factor Factor Factor influence influence influence Political factors Economic factors Socio-cultural factors Political 1 1 Economic 1 3 Socio-cultural 1 2 Political 2 1 Economic 2 2 Socio-cultural 2 1 Technological factors Legal factors Ecological factors Technological 1 3 Legal 1 3 Ecological 1 1 Technological 2 4 Legal 2 3 Ecological 2 1

Table 5.7 Evaluation of Russian factors changes possibility in 3 – 5 years Factor Factor Factor Factor Factor Factor influence influence influence Political factors Economic factors Socio-cultural factors Political 1 1 Economic 1 2 Socio-cultural 1 3 Political 2 2 Economic 2 1 Socio-cultural 2 1 Technological factors Legal factors Ecological factors Technological 1 2 Legal 1 2 Ecological 1 1 Technological 2 1 Legal 2 1 Ecological 2 1

Respondent 3 Table 5.8 Evaluation of foreign factors changes possibility in 3 – 5 years Factor Factor Factor Factor Factor Factor influence influence influence Political factors Economic factors Socio-cultural factors Political 1 2 Economic 1 3 Socio-cultural 1 1 Political 2 2 Economic 2 2 Socio-cultural 2 2 Technological factors Legal factors Ecological factors Technological 1 2 Legal 1 2 Ecological 1 1 Technological 2 5 Legal 2 2 Ecological 2 1

Table 5.9 Evaluation of Russian factors changes possibility in 3 – 5 years Factor Factor Factor Factor Factor Factor influence influence influence Political factors Economic factors Socio-cultural factors Political 1 2 Economic 1 2 Socio-cultural 1 2 Political 2 1 Economic 2 1 Socio-cultural 2 1 Technological factors Legal factors Ecological factors Technological 1 1 Legal 1 2 Ecological 1 1 Technological 2 2 Legal 2 1 Ecological 2 1

Respondent 4 Table 5.10 Evaluation of foreign factors changes possibility in 3 – 5 years Factor Factor Factor Factor Factor Factor influence influence influence Political factors Economic factors Socio-cultural factors Political 1 3 Economic 1 1 Socio-cultural 1 2 Political 2 1 Economic 2 1 Socio-cultural 2 1 Technological factors Legal factors Ecological factors Technological 1 3 Legal 1 4 Ecological 1 1 Technological 2 3 Legal 2 3 Ecological 2 1

Table 5.11 Evaluation of Russian factors changes possibility in 3 – 5 years Factor Factor Factor Factor Factor Factor influence influence influence Political factors Economic factors Socio-cultural factors Political 1 3 Economic 1 3 Socio-cultural 1 1 Political 2 1 Economic 2 1 Socio-cultural 2 1 Technological factors Legal factors Ecological factors Technological 1 1 Legal 1 2 Ecological 1 1 Technological 2 1 Legal 2 2 Ecological 2 1

Respondent 5 Table 5.12 Evaluation of foreign factors changes possibility in 3 – 5 years Factor Factor Factor Factor Factor Factor influence influence influence Political factors Economic factors Socio-cultural factors Political 1 2 Economic 1 3 Socio-cultural 1 1 Political 2 2 Economic 2 2 Socio-cultural 2 1 Technological factors Legal factors Ecological factors Technological 1 3 Legal 1 2 Ecological 1 1 Technological 2 4 Legal 2 2 Ecological 2 1

Table 5.13 Evaluation of Russian factors changes possibility in 3 – 5 years Factor Factor Factor Factor Factor Factor influence influence influence Political factors Economic factors Socio-cultural factors Political 1 2 Economic 1 1 Socio-cultural 1 1 Political 2 1 Economic 2 1 Socio-cultural 2 1 Technological factors Legal factors Ecological factors Technological 1 2 Legal 1 2 Ecological 1 1 Technological 2 3 Legal 2 1 Ecological 2 1

Table 5.14 PESTLE relative influence factors analysis of foreign hedge funds Factor influence Expert Middle possibility of Relative influence Factors on company evaluation factors changes of factors Political factors Political 1 2 2 1 2 3 2 2 0,20 Political 2 2 1 1 2 1 2 1,4 0,14 Economic factors Economic 1 1 3 3 3 1 3 2,6 0,13 Economic 2 1 1 2 2 1 2 1,6 0,08 Socio-cultural factors Socio-cultural 1 1 2 2 1 2 1 1,6 0,08 Socio-cultural 2 2 1 1 2 1 1 1,2 0,12 Technological factors Technological 1 3 4 3 2 3 3 3 0,45 Technological 2 3 4 4 5 3 4 4 0,60 Legal factors Legal 1 2 3 3 2 4 2 2,8 0,28 Legal 2 1 2 3 2 3 2 2,4 0,12 Environmental factors Environmental 1 1 1 1 1 1 1 1 0,05 Environmental 2 1 1 1 1 1 1 1 0,05 Total 20 24,6

Table 5.15 PESTLE relative influence factors analysis of Russian hedge funds Factor influence Changes Middle possibility of Relative influence Factors on company possibility factors changes of factors Political factors Political 1 3 2 1 2 3 2 2 0,30 Political 2 3 1 2 1 1 1 1,2 0,18 Economic factors Economic 1 1 2 2 2 3 1 2 0,10 Economic 2 1 1 1 1 1 1 1 0,05 Socio-cultural factors Socio-cultural 1 1 4 3 2 1 1 2,2 0,11 Socio-cultural 2 1 3 1 1 1 1 1,4 0,07 Technological factors Technological 1 3 2 2 1 1 2 1,6 0,24 Technological 2 2 3 1 2 1 3 2 0,20 Legal factors Legal 1 1 2 2 2 2 2 2 0,10 Legal 2 2 1 1 1 2 1 1,2 0,12 Environmental factors Environmental 1 1 1 1 1 1 1 1 0,05 Environmental 2 1 1 1 1 1 1 1 0,05 Total 20 18,6

На правах рукописи

Друзьянова Анастасия Александровна

АНАЛИЗ СТРАТЕГИЙ ХЕДЖ-ФОНДОВ В УСЛОВИЯХ НЕСТАБИЛЬНОСТИ РЫНКОВ Автореферат выпускной квалификационной работы

Направление подготовки 38.04.02 Менеджмент Магистерская программа: Стратегический менеджмент на английском языке

Якутск – 2019 СОДЕРЖАНИЕ ОБЩАЯ ХАРАКТЕРИСТИКА РАБОТЫ ...... 3

КЛАССИФИКАЦИЯ ТЕОРИЙ И МЕТОДОВ ИССЛЕДОВАНИЯ ...... 5 Инвестиционные стратегии ...... 10 Разработка стратегии ...... 12 Обзор инвестиционной индустрии ...... 13 Регулирование хедж-фондов ...... 17 Стратегии хедж-фондов ...... 17 Сравнение провала и успеха хедж-фондов по стратегиям (2014-2017) ...... 19 ЗАКЛЮЧЕНИЕ ...... 20 ИСТОЧНИКИ ЛИТЕРАТУРЫ ...... 21

2 ОБЩАЯ ХАРАКТЕРИСТИКА РАБОТЫ Хедж-фонды имеют влияние на компании и мировую экономику, поэтому понимание их стратегий актуально для изучения. После финансового кризиса 2008 и 2014, на мировых рынках наступил кризис доверия. Однако, мы можем наблюдать продолжительный растущий рынок за последнюю декаду. Развитие информационных технологий изменило среду рынка и инвестиций. Сегодня, инвесторы могут получать информацию доступно и быстро, свежие и важные новости об изменениях в индустрии и быть готовыми к коррекциям и разворотам рынка, в сравнении с возможностями 20-ти летней давности. Лучшие технологические возможности требуют больших финансовых возможностей, учитывая, что хедж-фонды в виду привлечения аккредитованных инвесторов (с вложениями от $1 миллиона долларов), стандартно развивают свои отделы исследований и разработок для получения технологического преимущества над конкурентами. Известно, что такие разработки увеличивают скорость получения и объем обрабатываемой информации, также скорость и качество анализа данных для принятия инвестиционных решений. Также, актуальность заключается в том, что Россия как развивающаяся страна нуждается в инвестициях в свои бизнесы и инфраструктуры. Учитывая, что Россия может предложить выгодные инвестиционные предложения в связи с ресурсным богатством, развитием бизнесов по регионам на просторной территории, хедж-фонды могут стать полезным инструментом для ускорения темпов развития бизнесов и страны в целом, помимо возвратности инвестиций. Однако, иностранные инвесторы под влиянием политических факторов, и отличных от западных стандартов бизнес моментов, к примеру, сложности проверки информации, сложности при вводе-выводе средств, бюрократической нагрузки и пр., предпочитают инвестировать в привычные компании. Таким образом, из-за вливания больших средств в иностранные фонды, экономики таких стран получают поддержку в развитии. Если инвестиции с большей вероятностью происходят в иностранные рынки, тогда как Россия будет развиваться без классических инструментов в виде инвестиций? В данном исследовании мы выявим те факторы, которые усложняют возможность инвестирования в Российские хедж-фонды, также барьеры в работе самих фондов и сравним с возможностями и проблемами хедж-фондов других стран, выявим различия в стратегиях, как бизнес, корпоративных так и в инвестиционных. На основе этого анализа будут разработаны рекомендации для совершенствования стратегий хедж-фондов. Гипотеза исследования – мы считаем, что факторами, влияющими на финансовые результаты хедж-фондов, являются:

3 1) технологическое преимущество, использование исследований и разработок для ускорения сбора и анализа данных, данных для принятия инвестиционного решения, 2) свободное регулирование по сравнению с другими инвестиционными компаниями, выраженное в свободе инвестирования и торговле, 3) влияние политической повестки на формирование инвестиционного портфеля, 4) стратегии основанные на понимании иррациональности рынка и его участников, имеют более гибкие и независимые стратегии, что сокращает риски убытков, 5) участие инвесторов в принятии решений ввиду их особого статуса и возможностей – институциональные и индивидуальные. Мы ожидаем, что некоторые могут предоставлять больше информации чем другие, также могут отказаться участвовать в опросе, поэтому мы используем контент анализ, для восполнения пробелов с доступом к прямой информации, это позволит нам получить необходимый перечень данных для составления общей картины. Отсутствие стратегии, доступности информации, отказ от прохождения анкетирования также являются показательными результатами для выводов исследования. Проблема – российский инвестиционный рынок развивается относительно недавно, и деятельность российских хедж-фондов отличается от иностранных, данное исследование позволит определить эти различия, а также различия в факторах и условиях, в которых ведут деятельность российские хедж-фонды. Для этого анализа хедж-фондов необходимо ответить на следующие вопросы: 1. Какие конкурентные преимущества имеют хедж-фонды как участники финансового рынка? 2. В чем отличие стратегий российских хедж-фондов от иностранных? 3. Как инвесторы влияют на стратегии? Цель исследования – определить факторы, повлиявшие на успех/провал и сделать рекомендации по стратегиям хедж-фондов в условиях изменения среды. Исследование состоит из следующих задач: 1. обзор литературы (теоретическое исследование), выбор методов исследования и теорий для анализа, 2. сбор данных, 3. анализ внешней и внутренней среды, факторный анализ, 4. выводы по результатам исследования и рекомендации. Объект исследования – хедж фонды (менеджеры и инвесторы). Предмет исследования – факторы успеха или провала.

4 Хедж-фонды известны управлением большими суммами средств, по последним подсчетам около $3.6 триллионов. Хедж-фонды имеют минимальное регулирование и ограничение деятельности в индустрии, к примеру, они могут использовать деривативы и короткие позиции. Исследование состоит из введения, теоретической и аналитической частей, заключения в котором представлены практические рекомендации для совершенствования деятельности хедж-фондов. В теоретической части произведен анализ учебников, монографий, исследований, научных и аналитических статей. В аналитической части произведен сбор данных из открытых источников, аналитических и бизнес изданий, официальных сайтов самих хедж-фондов, из интервью менеджеров хедж-фондов в открытом доступе, а также из ответов менеджеров на анкеты. В исследовании был произведен анализ 8 хедж-фондов, представленных в таблице 1.1. [1] Таблица 1.Список хедж-фондов

Средства на управлении в № Название Происхождение Тип 2018 г., в долларах 1 AQR capital management Гринвич, КТ LLC 203 млрд 2 Bridgewater associates Уэстпорт, КТ LP 124.7 млрд 3 Man group Лондон Public 108.5 млрд 4 Citadel Чикаго LLC 30 млрд. 5 Hermitage Capital Management Лондон LP 4 млрд. 6 VR Global Offshore Fund Россия Ltd. 1634 млн. (2014) 7 Arbat Capital Россия Ltd 44.8 млн. 8 Kvadrat Black Fund SP Москва SP

Классификация теорий и методов исследования Уровень сложности области исследования и разнообразие теорий позволяют произвести обширный анализ, выполненный в этом исследовании. Таким образом, диссертация будет ограничивать количество хорошо выбранных разнообразных теорий, которые сокращены до наиболее важных факторов, касающихся исследования. Это должно позволить оценить эмпирическую и аналитическую часть.

1 http://pbwm.ru/articles/reyting-rossiyskih-hedzh-fondov-spear-s-russia

5

Инвестиционные стратегии Инвестиционные подходы

Инвестиционные теории

Инвестиционные Стратегический Бизнес стратегия стратегии анализ

Изучение стратегий

Принятие решения Поведенческие финансы

Инвестиционная психология

Регулирование Культура инвестирования

Различия в инвестициях в России и других странах

Новые Политические Финансовая Управление технологии факторы повестка изменениями

Современное изменение среды

Рисунок 1 Классификация теорий

Данная классификация показывает, как выбранные теории относятся к основным блокам изучения.

6

Таблица 2 Методы исследования Анализ внешней среды Анализ внутренней среды Анализы для определения факторов Анализ пяти Контент Сравнительный Составление и Факторный Матрица «вероятность- PESTLE конкурентных сил SWOT анализ анализ анализ анкет анализ воздействие» Портера Анализ для Сравнительный Современные Сравнение Анкета Корреляция и Выявляет влияние Позволяет определения анализ индустрии, методы инвестиционных состоит из 24 зависимость значительных факторов анализировать политических, определяющий контент стратегий, вопросов, будет микро и макросреды на факторы как экономических, интенсивность анализа подходов, наличия составленных определяться будущее фирмы. внутренней, социальных, конкурентных сил позволят или отсутствия для по методике, 1. Как (позитивно или так и внешней технологических, в отрасли для исследовать бизнес и упрощения он позволит негативно) этот фактор среды. правовых аспектов нахождения стратегии корпоративных факторного определить может повлиять на Стандартный и аспектов максимально хедж-фондов, стратегий, для анализа. взаимосвязь позицию фирмы? анализ, внешней среды, защищенной от собрать классификации между 2. Какова вероятность дополняющий которые могут конкурентных данные для хедж-фондов по возвратность роста этого фактора, предыдущие повлиять на влияний позиции. факторного стратегиям и ю инвестиций может ли это проследить? анализы. бизнес. Чем ниже влияние анализа. подходам. и выбранными 3. Насколько большим конкурентных сил, Также для будет влияние этого тем выше сравнительный исследования фактора на фирму? возможностей анализ позволит факторами, 4. Когда влияние этого получить высокую определить представленн фактора на организацию прибыль и различия в ыми в может ослабнуть? Скоро? наоборот. законодательстве, гипотезе В среднесрочной барьерах и других исследования. перспективе? После условиях ведения долгого времени? деятельности.

Таблица 2 Методы исследования (продолжение)

Анализ внешней среды Анализ внутренней среды Анализы для определения факторов Анализ пяти Матрица Контент Сравнительный Составление и PESTLE конкурентных сил Факторный анализ «вероятность- SWOT анализ анализ анализ анкет Портера воздействие» Анализ В современной Закрытый Сравнительный Это позволит Он позволит Анализ После позволит индустрии финансовых характер анализ покажет более конкретно выявить факторы, позволит результатов всех определить рынков конкуренция хедж- различия во охарактеризовать существенно и определить проведенных различия в происходит более фондов, внутренней работе стратегии на трех незначительно потенциалы анализов и условиях безлично на биржах, где усложняет менеджеров хедж- уровнях фондов, влияющие на влияния полученных (внешней основным доступ к фондов, выбор а также результаты факторов, их результатов мы среды) преимуществом является официальной инвестиционных и обосновать или работы фонда. силу влияния, сможем ведения размер капитала и отчетности, торговых объяснить выбор а также подвести общие деятельности скорость получения но данный стратегий, фонда в пользу оценить в итоги иностранных информации. Считается, метод различия в выбранных будущем исследования. и российских что хедж-фонды имеют позволит отношениях с стратегий. тенденцию к хедж-фондов. более богатых и более восполнить инвесторами и ослаблению квалифицированных пробелы в с точки зрения или усилению инвесторов, поэтому данных. деятельности хедж- факторов. имеют больше ресурсов фондов по и возможностей, изучаемым соответственно, факторам. занимают более выгодные позиции в среднем по рынку.

Методы исследования классифицированы по назначению: анализ внутренней, внешней среды, а также анализы для определения факторов, повлиявших на результаты хедж-фондов. Здесь, необходимо обозначить, что такое внешняя и внутренняя среда организации, учитывая специфику инвестиционных компаний. Внешняя и внутренняя среда организации одинаково важны и оказывают влияние на деятельность, однако разница заключается в возможности повлиять на внутреннюю среду в отличие от внешней. Данные методы были выбраны для достижения цели исследования, учитывая их возможности и ограничения. Во-первых, что такое хедж фонд? Согласно определению Barclay Hedge: Хедж Фонд (ХФ) – это альтернативный инвестиционный инструмент доступный только для опытных инвесторов, таких как институты и индивидуальные инвесторы со значительными активами. Хедж фонды обычно структурируются как ограниченные партнерства, где генеральный партнер является управляющим портфелем, принимает инвестиционные решения, а партнеры с ограниченной ответственностью выступают в роли инвесторов. Эта правовая форма освобождает средства от широкого спектра правовых требований и правил. В настоящее время хедж фонды не регулируется Комиссией по ценным бумагам и биржам США (SEC), которая осуществляет надзор за финансовой отраслью, как в случае с паевыми инвестиционными фондами (ETF). Поскольку хедж-фонды относительно нерегулируемые, они могут инвестировать в более широкий спектр ценных бумаг, чем взаимные фонды. Хотя многие хедж-фонды инвестируют в традиционные ценные бумаги, такие как акции, облигации, товары и недвижимость, они наиболее известны за использование более сложных (и рискованных) инвестиций и методов. Поэтому для данного исследования хедж фонд определяется как любой зарегистрированный или незарегистрированный, управляемый частным образом, пул капитала с определенными клиентами, которые являются состоятельными и опытными инвесторами. Кроме того, хедж фонд обладают следующими характеристиками: - Подлежат тем же правилам рынка, что и любой трейдер, и индивидуальный инвестор. - Являются частью вселенной альтернативных инвестиций. - Имеют возможность использования деривативов и рычагов. - Главным отличием хедж фондов в плане возможностей, является разрешение открытия позиций на короткие продажи в отличии от взаимных фондов.

-Хедж фонды используют разные степени кредитного плеча. Некоторые стратегии нежизнеспособны без больших рычагов, когда как другие стратегии вообще не предполагают использования рычагов. - Производительность измеряется в абсолютных единицах (доходах), а не относительно эталона (индекса). - Результаты поступают из разных источников в разных пропорциях. Таким образом, «абсолютный доход» состоит из доходов от пассивных и активных стратегий (бета и альфа). - Наличие различных видов сборов, а также иногда высокие комиссии за управление. Наиболее распространенными являются 1-2% годовых – комиссия за управление активами и 20% годовых вознаграждение от прибыли. Управляющие хедж фондами почти всегда вкладывают собственные средства в свои управляемые хедж фонды. Это мешает управляющим принимать неконтролируемые риски. - Преимущество на медвежьих рынках, низкая корреляция с фондовыми рынками, высокий потенциал доходности и полезность для диверсификации.

Инвестиционные стратегии В хедж-фондах инвестиционный менеджер обычно выбирает основную стратегию и решает, как именно он примет инвестиционное решение. На рисунке 2.2 представлены пять основных стратегий, используемые сегодня хедж-фондами. 1) Equity Hedge: используя 50% и более основного капитала выставляются длинные и короткие позиции по базовым финансовым инструментам (ценные бумаги), а по оставшейся части капитала выставляют длинную или короткую позицию по деривативам (производным инструментам от основных, например фьючерсы). Такая стратегия подразумевает инвестицию в один инструмент, например на длинную позицию, в ожидании роста, а хеджирование рисков происходит открытием противоположной ожидаемому сценарию роста или снижения стоимости в другой сделке, например по фьючерсам на этот актив. Тогда в случае снижения стоимости актива в ожидаемом времени, фонд получает инвестированную прибыль с позиции по фьючерсам. При составлении инвестиционного портфеля используются как количественные, так и фундаментальные методы оценки активов. Стратегии в свою очередь, могут быть широко диверсифицированными либо узко направленными на конкретные отрасли экономики. Также инвестиционные менеджеры используют различный уровень кредитного плеча и инвестируют на различный срок.

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2) Event Driven: такие стратегии пытаются использовать в своих интересах события, которые создают существенные ценовые движения. Инвестиционные менеджеры при такой стратегии используют широкий диапазон финансовых инструментов, длинные и короткие позиции по обыкновенным и привилегированным ценным бумагам, облигациям, опционам, кредитным дефолтным свопам, также высокий уровень кредитного плеча, по усмотрению менеджера. Хедж-фонд, использующий такую стратегию, исходит из того, что рынок не может оценить правильно текущую ситуацию, его оценка активов является иррациональной, такой же концепции инвестирования придерживался Б. Грэм и У. Баффет. Предполагается, что хедж-фонды придерживающиеся Event Driven стратегии не зависят от движения рынка, так как их прибыль зависит нет от правильно сделанных ожиданий по поводу цены, а их действия по факту событий. Примерами таких событий могут быть слияния, поглощения, банкротство, политические события (торговая война, война) и пр. 3) Macro: менеджеры использующие макро стратегию, при формировании инвестиционного портфеля оценивают макроэкономическую ситуацию, оценивают движения целых классов активов или рынков. Как правило, отслеживаются процентные ставки, цены валют, государственная политика, темпы инфляции и цены на сырье, для прогнозирования тенденций на глобальных рынках. Характер таких инвестиций считается переменчивым и высоко рискованным, так как макро стратегия реализовывается в сложной по структуре среде, включающей в себя множество факторов влияющих на цены. Также, к макро стратеги можно отнести инвестиции в развивающиеся рынки. 4) Relative Value: стратегия относительной стоимости предназначена для минимизации рисков, извлекая выгоду из ценовой неэффективности. Такая стратегия покупает недооцененные ценные бумаги, и продает, открывая короткую позицию, переоцененные активы. Арбитраж подразумевает множественные краткосрочные сделки внутри дня, в случае хедж-фондов большими суммами, минусом такой стратегии является неспособность рынка отвечать позициям хедж-фондов по причине больших сумм сделок хедж-фондов. Поэтому, на практике, такая стратегия используется в сочетании с другой фундаментальной стратегией, снижая риски от инвестиций в долгосрочном периоде. Арбитраж реализуется на коротком отрезке времени при относительной нейтральности цены с использованием преимущественно технического анализа (анализа графика, объемов и ленты сделок), но сама причина использования такой стратегии

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заключается в недоверии к долгосрочному поведению рынка. Кроме того, арбитраж позволяет контролировать сделки в наибольшей степени в сравнении с другими стратегиями. 5) Multi-Strategy: одна из наиболее распространенных среди хедж-фондов стратегия, которая подразумевает использование двух и более стратегий, их сочетаний. 6) Fund of Funds: стратегия инвестирования в фонды, для диверсификации портфеля и снижения рисков. Менеджер может выделять многочисленным фондам в рамках одной, схожих стратегий либо многочисленным фондам в нескольких стратегиях. При этом, преимуществом такого способа хеджирования рисков является ее низкая требуемая инвестиция и низкие расходы на премии менеджерам, к примеру индексных фондов. Приведённые стратегии используются различными способами, в различных сочетаниях, на усмотрение инвестиционных (портфолио) менеджеров хедж-фондов.

Разработка стратегии Бизнес стратегия должна помочь использовать свои конкурентные преимущества, и она состоит из следующих компонентов: 1) Долгосрочные цели. 2) Действия. 3) Ресурсы. Потребительская теория Предпочтения инвестора влияют на успех менеджера в краткосрочной перспективе. Предпочтения шире, чем возврат, и подразумевают риск. Страх перед противоположностью и безопасность следования за стадом, привлекательность азартных игр и отвращение к потерям - все это предрассудки поведения человека, которые влияют на успех менеджера. Фактически, даже если бы мы могли определить и дать количественную оценку того, что является неотъемлемым качеством менеджера хедж-фонда, краткосрочные результаты и обратная связь по-прежнему будут движущими факторами, определяющими победителей и проигравших в отрасли. Информация, необходимая для принятия инвестиционного решения, не является стационарной. Ограниченные данные и краткосрочный характер делают чрезвычайно сложным обнаружение изменений в данных. Основными характеристиками хедж-фонда являются их местоположение и стратегия. Местоположение описывает «где» торгует менеджер, то есть выбор классов активов. Стратегия относится к тому, «как» торгует менеджер, т. е. как эти классы активов используются для получения прибыли. Стиль (подход) включает в себя обе функции, например глобальная макростратегия сочетается с инвестициями в облигации.

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Таблица 3. Классификация инвестиционных стратегий № Название Описание Поведенческая Рациональная 1 Event driven Ориентируется на прибыль от + корпоративных событий, таких как слияния, поглощения и банкротство 2 Relative value Ожидает поймать разницу в цене + среди схожих категорий ценных бумаг 3 Tactical Ориентируются на + + trading / макроэкономические события, macro тренды, открывая однозначные лонг и шорт позиции (акции, долговые бумаги, товары и валюты) 4 Equity long / Ожидает получать прибыль от + short открытия длинных и коротких позиций 5 Multi-strategy Следует минимум двум + + стратегиям, из представленных, для диверсификации альтернативных воздействий

Обзор инвестиционной индустрии Востребованность хедж фондов, как альтернативных инвестиционных инструментов, началась с момента создания такого вида фондов в 1949 г. Хедж-фонды разрослись во время рыночного бума в начале этого десятилетия, но в результате кредитного кризиса 2007 и 2008 годов многие из них закрылись. Один из них, Bernard L. Madoff Investment Securities, оказался мошенничеством. В результате они подвергаются возрастающей должной осмотрительности. Несмотря на эти недавние проблемы, хедж-фонды продолжают предлагать инвесторам надежную альтернативу традиционным инвестиционным фондам - альтернативу, которая дает возможность более высокой доходности, не связанной с рынками акций и облигаций. В результате хедж-фонды, скорее всего, останутся здесь.2 В ходе дискуссии об институциональной инвестиционной стратегии на Bloomberg Global Business Forum 2018 эксперты пришли к выводу, что 10-летний бычий рынок может столкнуться с новым финансовым кризисом.

2 https://www.barclayhedge.com/what-is-a-hedge-fund/

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Мэри Каллахан Эрдос, генеральный директор JP Morgan Asset & Wealth Management на Bloomberg Global Business Forum 2018, говорит: «После финансового кризиса 2008 года денежная индустрия испытывает кризис доверия к финансовым институтам, которые перемещают деньги по всему миру и одалживать деньги, это произошло в условиях кризиса уверенности в том, что люди хранят свои наличные деньги, все от вкладов в банке до фондов денежного рынка и того, как они будут финансировать себя на следующий день. Общие средства на управлении по всем хедж-фондам оцениваются в $3,22 трлн., по состоянию на конец 2018 года.3

СРЕДСТВА НА УПРАВЛЕНИИ В 2018, В МЛРД. ДОЛЛАРАХ

Американский 26%

Глобальные рынки 56%

Европейский 7%

Азиатский 3%

Развивающиеся рынки 8%

Рисунок 2 Средства на управлении хедж-фондов в 2018 г., в миллиардах долларов

Десять лет назад все внимание было сосредоточено на нефтяной промышленности, но сегодня внимание уделяется рынку данных и технологий. Поскольку огромные инвестиции в развитие рынка технологий развиваются быстрее, Клаус Шваб также сделал историческую эволюцию предыдущих промышленных революций и признал, что скорость новых революций возрастает. Все это дало частным компаниям мощный инструмент для сбора данных, анализа, который дал им лучшие возможности по сравнению с публичными рынками акций. Это важное преимущество хедж-фондов, однако возникают исходящие из этих перемен проблемы в области ужесточения конкуренции в технологиях, увеличение

3 Hedge Fund Asset Flows Report December 2018. Institutional insights. Evestment.

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затрат на исследования и разработки, проблемы с законностью добычи данных, нарушением законодательства в области защиты персональных данных.

Технологическая конкуренция Мэри Каллахан Эрдос, генеральный директор J.P. Morgan Asset & Wealth Management: «Данные делают инвесторов более частными и хедж-фондами разумнее, данные помогают им принимать правильные решения, знают, где они находятся, знают, как они отслеживают». Искусственный интеллект (ИИ) – актуальность состоит в интриге относительно того, заменят ли машины людей в качестве управляющих портфелями. «Робо-советники» уже существуют, предоставляя базовые финансовые консультации с использованием алгоритмов, которые рассчитываются на основе задаваемых вопросов. Несмотря на недавние достижения, многие приложения в этой области компьютерных наук все еще находятся в зачаточном состоянии, и это особенно актуально при попытке применить ИИ для управления активами. Мы верим, что реальным источником ценности для отрасли является увеличение интеллекта (ИА), которое использует ИИ, чтобы помочь людям принимать решения, а не принимать решения за них. Одним из типов ИИ является машинное обучение – использование статистических алгоритмов и методов для изучения шаблонов в больших объемах данных. Одним из наиболее распространенных коммерческих приложений машинного обучения является прогностическая аналитика, помогающая прогнозировать будущие результаты. То, что определяет качество обучения, является качеством ввода. Когда дело доходит до получения оптимальных выходов AI, есть пять ключевых условий для успеха: 1) постоянная среда, где правила фиксированы и не меняются, 2) соответствующая информация является цифровой, количественно, 3) обильные объемы данных, 4) низкая неопределенность, 5) четкие цели. Для отрасли управления активами IA является гораздо более важной областью науки, чем AI. Это позволяет извлекать информацию, которую мало кто может идентифицировать, даже если данные находятся на виду. Это имеет огромные преимущества, когда дело доходит до фундаментального инвестирования. Любой управляющий фондом, рассматривающий свои инвестиции, имеет доступ ко многим полезным сведениям о компании – ее финансовом состоянии, ее доходах, заявленных планах ее управления. Но есть и другие важные вещи, к которым в настоящее время инвесторы не имеют доступа по традиционным каналам.

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Наборы данных, которые содержат эту информацию, слишком велики и не структурированы, чтобы специалист по инвестициям мог использовать обычные методы, такие как Excel. Именно здесь ИИ и машинное обучение могут быть полезными инструментами, которые помогут превратить данные в понимание, чтобы заполнить слепую зону, тем самым увеличивая интеллект менеджера фонда. Однако отдельный управляющий фондом будет контролировать инвестиционные решения.4 Global Alternative Fund Survey 2018 провели опрос: как бы вы описали текущее состояние вашей организации в использовании искусственного интеллекта для поддержки инвестиционного процесса?

Chart Title

73% Не используют и не собираются 40%

17% Не используют, но собираются 31%

10% Используют ИИ 29%

0% 10% 20% 30% 40% 50% 60% 70% 80%

2017 2018

Рисунок 3 Использование хедж-фондами искусственного интеллекта (ИИ) в инвестициях 2017-2018 гг.

В 2017 году произошел 200% рост использование искусственного интеллекта (ИИ) среди менеджеров хедж-фондов и почти 100% рост тех, кто ожидают использовать ИИ в ближайшем будущем. Количественные менеджеры были на переднем крае этой технологии для лет, но менеджеры всех стратегий были наращивание возможностей и использование торговых систем и инструментов следующего поколения. В отличие от большинства частных управляющих еще не определены бизнес-кейсы для обоснования инвестирования в ИИ. Мы ожидаем, что по мере развития технологий более приспособлены для промышленности и частного акционерного капитала менеджеры становятся более комфортно с его функциональные способности, мы увидим

4 Man or Machine – Who’s really driving your portfolio? Mark Ainsworth. Schroders, January 2019

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экспоненциальный рост как мы сейчас наблюдаем с хедж-фондом менеджеры. Тем не менее, в настоящее время многие управляющие частными акциями продолжают двигаться вперед их технологическое путешествие и только движутся за пределами использования основных инструментов, таких как электронные таблицы.5

Регулирование хедж-фондов Хедж-фонды принимают инвестиции только от квалифицированных или аккредитованных, то есть от крупных инвесторов, таких как: банки, пенсионные фонды, страховые компании, а также частные инвесторы, имеющие опыт или высокий доход. В связи с основной целью хедж-фондов – использование всех возможностей для увеличения прибыли инвесторов, компании было принято регистрировать в зонах с льготным налогообложением (Кайманы, Британские Виргинские острова и пр.), что оптимально с точки зрения снижения расходов. Однако это не мешает им производить свою деятельность в традиционно востребованных инвесторами и специалистами в финансовых рынках странах как США, Великобритания и др. Свобода хедж-фондов заключается в возможности использования всех финансовых рычагов для получения многократной прибыли, но это в свою очередь несет риски возможных серьезных потерь для инвесторов, а также для всего рынка, так как хедж-фонды могут открывать позиции на значительные суммы, таким образом у них есть возможность, принимая риски, влиять на цены и на рынок в целом. Еще одним недостатком можно считать отсутствие требований к соблюдению законодательства о противодействии легализации (отмыванию) денежных средств через офшорные зоны. У российских инвесторов меньше вариаций финансовых инструментов, исследование состоит в сравнении российского и зарубежного рынков. Американские финансовые рынки, а также Великобритания имеют большую историю, и важно проанализировать различия для достижения цели исследования.

Стратегии хедж-фондов Как правило, инвестиционные стратегии ранжируются по уровню субъективной оценки и доверия к стабильности, закономерности рынка, по уровню требуемой информации для принятия решения и других факторов. Для исследования были выбраны хедж-фонды с наибольшим показателем параметра – средства на управлении по состоянию на 2018 год из рейтингов, а также несколько фондов с различными подходами к инвестированию.

5 Global Alternative Fund Survey 2018, p.17

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AQR capital management Мульти-стратегия данного хедж-фонда состоит из следующих стратегий:6 1) Macro – долгосрочное, основанное на макроэкономическом фундаментальном анализе и экономической теории. Инвестиции в развивающиеся рынки. 2) Event driven 3) Relative Value – арбитраж, основанный на краткосрочном сильном движении цены под влиянием событий, 4) Equity Hedge AQR capital management, осуществляет инвестиционный выбор основываясь на количественных данных, событиях и фундаментальном анализе, таким образом их подход к инвестированию можно оценивать как доверительный к рынку, риски покрываются сделками по арбитражу и event driven стратегией.

Bridgewater associates Хедж-фонд принимает инвестиции только от институциональных инвесторов с 2006г.: пенсионных фондов, эндаумент фондов, центральных банков и пр. Стратегии данного фонда разделяются на - бета и альфа инвестиции. Бета инвестиции – возвратность инвестиций достигается пассивным управлением и включает стандартные риски. Альфа инвестиции – цель таких инвестиций заключается в получении высокой возвратности, путем активного управления. Основатель Bridgewater associates Рэй Далио в 1990 году представил данную концепцию инвестирования. Чистый альфа, состоит из 30 – 40 торговых позиций в облигации, валюты, фондовые индексы и товары для избегания концентрации активов в одном секторе.

6 https://www.aqr.com/Strategies#overview

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Сравнение провала и успеха хедж-фондов по стратегиям (2014-2017)

Таблица 6.2. Финансовые результаты инвестиционных компаний, с определением инвестиционных стратегий Название Стратегия Подход Возвратность, % хедж-фонда 2014 2015 2016 2017 Всего AQR capital Multi Global macro, 5.93 17.59 5.85 5.83 35,2 management strategy: long/short equity etc. Bridgewater Multi global macro investing 96.9 3.34 2.00 1.25 103,49 associates strategy: style based on economic trends, such as inflation, currency exchange rates, and U.S. gross domestic product. Renaissance Multi specializes in systematic 14.53 17.37 21.46 15.22 21,12 technologies strategy: trading using quantitative event-driven, models derived from relative value mathematical and statistical analyses. Man group Multi- Макро: инвестиции в 15.80 7.50 - 15.20 26 strategy: развивающиеся страны. 12.50 countries Открытие долгосрочных long only, (лонг) позиций на низко long short, волатильных финансовых инструментах. De Shaw&Co Мульти- Арбитраж, лонг/шорт, 1.01 0.99 1.04 1.12 4,16 стратегия: макро, инвестиции в лонг/шорт компании в области возобновляемой энергии, страхование, фьючерсы,

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ЗАКЛЮЧЕНИЕ С развитием междисциплинарных исследований в области финансов и психологии, а затем поведенческих финансов, появилась возможность углубить знания о финансовом рынке и его участниках. Мы использовали методы исследования, позволяющие оценить стратегии с различных сторон. Также использовались современные методы исследования и электронные ресурсы. Основными барьерами развития российского инвестиционного рынка можно считать: 1-нежелание руководителей делиться результатами своей деятельности с заинтересованными сторонами, сайты многих российских хедж-фондов не функционируют, интервью журналистам и исследователям не дают, такой закрытый характер работы безусловно замедляет процесс развития индустрии, не освящаются актуальные для общества и самих хедж-фондов вопросы и проблемы; 2-наличие недоверия к российской индустрии со стороны иностранного общества, на это повлиял ряд стереотипов исходящий из культуры подкрепленный цепочкой событий, как писал руководитель Hermitage Capital Management в своей книге «Красный циркуляр», а также в своем интервью по поводу дела Магнитского; 3-набирающая оборот новая «гонка вооружений» в технологическом плане, в которую необходимо активно включаться, выделять серьезные средства для получения конкурентного преимущества. Таким образом, рекомендации для российских хедж-фондов следующие: 1) Активно участвовать в жизни индустрии, делиться своими результатами деятельности, здесь речь идет не о коммерческой информации, к примеру руководители, Bridgewater associates и Citadel делятся на официальном сайте своим аналитическим мнением по поводу актуальной ситуации в индустрии, публикуют исследования по рынку и пр. Такие действия позволяют понимать и оценивать позицию и политику хедж-фонда, что может помочь ему развиваться, привлекать талантливых людей. Также участвовать в конференциях, интервью, публичных мероприятиях. 2) Развивать свои стратегии, проверять на актуальность, также работать над бизнес стратегией, на примере Man Group, который стал брендом, олицетворяющим качество услуг, их стратегия диверсификации бизнеса в узкой отрасли приносит одну из высоких прибылей в индустрии, у них есть разные инвестиционные формы, свои исследовательские центры, консультирование и пр., в том числе они способствуют поддержанию Лондоном статуса финансового центра Европы.

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