CoachA hedge fund is a privately offered investment vehicle that trades outside investors’ capital with few constraints on instruments, leverage or short selling, and is paid a fee on the assets plus a share of the profits. A multi-manager platform is a hedge fund organised as many independent teams (“pods”), each given capital and tight risk limits by a central allocator that nets and manages the sum.
Examples
Example 1.7 (Five firms, one table)
| Whose capital | Paid by | Holding period | Main cost | |
|---|---|---|---|---|
| Market maker | owners’ | the spread | seconds to hours | technology |
| Proprietary firm | owners’ | trading profit | seconds to weeks | technology, people |
| Hedge fund | investors’ | fees on assets and profits | days to years | people |
| Asset manager | clients’ | fee on assets | months to years | distribution |
| Bank desk | shareholders’ | spread and client business | minutes to months | capital |
The rest of the series keeps returning to this table: a technique that is central to one row (speed, for the first) is irrelevant to another (the fourth).