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Hedge Fund Investment Strategies

2011
09.28

Hedge funds are private investments and provide critical strategies to hedge against market risks that could benefit every portfolio. From the Gates’ and Buffets to the smallest investors, everyone could use a little protection against a market meltdown. Now some mutual funds use these strategies, too.

How Hedge Funds Differ from Mutual Funds

Aside from minimal regulation and the high minimum investment, hedge funds are similar to mutual funds. It is the strategies they employ that are the main difference. Hedge fund managers have greater flexibility over their funds’ investments. A typical mutual fund manager will be limited by set asset allocations (say, 70% stocks and 30% bonds). A hedge fund’s investments, on the other hand, are up to the sole discretion of the manager. So, let’s have a look at the strategies that hedge funds, and now some mutual funds use as more and more companies go global.

Hard Assets

Hedge fund managers may sell most of the fund’s securities and hold cash (US dollars or Euros, usually) or other assets (commodities). Hard assets shield investors from overexposure to the equity markets.

Short Selling (Shorting)

Shorting is selling stocks that you do not own so that you can buy them back at a discount later. Any investor with a margin account can do this, but few mutual fund managers are entrusted with this high-risk strategy.

If an investor decides that a stock is overvalued — Let’s say XYZ is trading at $7.50 — the investor shorts 1,000 shares of XYZ at a profit of $7,500 ($7.50 per share X 1,000 shares). She now has an extra $7,500, but must buy back those 1,000 shares of XYZ in the future.

Luckily, a week passes and XYZ releases a negative outlook press release and the stock price drops to $6.50. Our investor calls her broker and “covers” (purchases) 1,000 shares for $6,500, keeping the remaining $1,000 for herself. This is a risky strategy which loses money when the stock rises in value.

Long-Short

Historically hedge funds typically blend short selling with “long” positions, hence the name long-short. Long-short funds purchase securities that they think will increase in value while shorting securities they think will fall. This hedges

Equity Market Neutral

Equity market neutral is stock-picking within an asset class that hedges against risk using a long-short method within that asset class. A fund manager may believe that ABC stock is a better health insurance stock than ZZZ. The manager will then buy, or “long,” ABC while simultaneously shorting ZZZ.

With this strategy all that matters is the relative performance of these two stocks, regardless of the larger market’s performance. If ABC stock rises more than ZZZ (or falls), the investment makes money.

Market Neutral Arbitrage

Arbitrage investing exploits imbalances in pricing between securities.

Market neutral arbitrage seeks out imbalances in securities from the same issuer. This strategy hedges against market risk by investing in opposing positions (long and short) in different asset classes of the same issuer. A manager, then, may short sell a company’s stock while simultaneously purchasing the same company’s bonds.

Merger Arbitrage

Merger arbitrage focuses on companies involved in a takeover or merger. When Company A announces that it is going to buy Company B for a set price (let’s say, $50 per share), Company B’s stock will rise to a point just below that of Company A’s purchasing price (let’s say $48 per share). The difference between the acquiring price ($50) and the stock price of Company B ($48) is called the spread ($2 in our example). The point of merger arbitrage is to turn that spread into short-term profit.

If two companies are merging, the manager purchases shares of the smaller company while shorting the larger until the merger.

The only risk in merger arbitrage is deal risk – the possibility that the merger or acquisition will fall through.

Convertible Arbitrage

A convertible bond is a corporate bond that can be redeemed for company stock at some future point. Like any bond, its price falls if a company’s credit rating falls or if interest rates rise. Convertible arbitrage profits from the difference between the price of the bond and the value of the stocks it can be redeemed for.

Fund of Funds

As its name implies, a fund of fund invests in multiple mutual funds or hedge funds. Multiple funds may diversify a single strategy over different asset classes, or they may employ various strategies. Such a fund spreads the investment over multiple hedging strategists.

Use These Strategies Sparingly

In recent years many mutual funds have emerged that use these strategies. Look out for them and invest cautiously. No more than 10% of your portfolio should invest in any of these off-market strategies, but they will provide stable returns even in a down market.

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Brian D. Ladin on Hedge Funds, A Private Investment

2011
09.28

Most people understand what a mutual fund is and think a hedge fund investment is the same thing. They are correct in that a hedge fund is a group of investors that pool their money, just like a mutual fund. Hedge funds, however, don’t have the same type of regulation that the mutual fund has. In fact, you have to have a specific amount of wealth to invest in a hedge fund and a required amount of investment strategy and savvy. A hedge fund investment is not a public offering, but often a private limited partnership with the fund manager as the general partner.

Hedge funds do things because it is a private investment, which regular mutual funds can’t do. One example is the ability to sell short. This is a risky technique especially if it’s a naked short sale. The short sale is when you sell a stock in hopes of purchasing it later at a cheaper price to fill the sale.

A naked sale is one where you sell a stock you don’t own. To comply with government regulations you must be able to borrow it from someone before you sell it. The reason that it’s so risky is that the price could skyrocket after you sell the stock. Then you must pay huge amounts to fulfill your obligations to the buyer.

When large hedge funds use the techniques, often they drive the price down artificially in the sale of the stock and minutes later, can make a quick profit with the purchase and delivery of the cheaper stock. This is one way a hedge fund investment brings higher income than the traditional mutual fund.

The original purpose of a hedge fund was to hedge against the market’s swings, explains Brian D. Ladin. The combination of different types of investments provided an equation against falling markets. The change came as hedge funds became more popular. Today, they provide not just a hedge against loss but an edge for gain.

The typical hedge fund investment contains derivatives that are high yield and debt from companies considered risks, so they have to pay more to borrow, or their loans sell at discounted rates which means the yield on the return is higher. If you use a $1,000 loan as an example, with the company loan rate at 8%, that is a decent comfortable return. Now, if that same company gets behind on the loan and the lending institution panics, they might sell it at a 50 percent reduction of the balance to the hedge fund. This in effect means that not only does the fund get 16 percent interest, but if the company actually pays the loan in full, they make a 100 percent gain on that money.

If you have plenty of money already, you may be the perfect candidate for a hedge fund investment. These types of investments are supplementary to normal investments. They attempt to defeat bear markets and bring in money while they also take advantage of the bull market and yield a higher return. There are risks in a hedge fund, ones that the average investor would never take.

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Brian D Ladin Understanding Global Trade to Succeed

2011
06.30

For centuries global trade has been a flourishing business, and it has also been known as import-export business as well. So far, the dealings were simple and people did not need much in terms of complex technology. However, with the introduction of the internet to global trade, many safeguards have now been built in, and bank dealings now require computers. It has made the dealings more complex, but it has also brought in the ease of getting information and standardizing the procedures. Exporters and importers now have the capability to easily handle banks and customs. Today, global business absolutely impacts the satisfaction of the client.

Customs are the pivot point for global trading procedures and occupations. Goods need to be quickly cleared from the customs and for this, knowledge of the basics of global trading is essential. Other items essential to work with customs are credit assurance, logistics, forms of payment, risk minimization, source classification, contract terms, running channels and selling.

An international marketing plan is the foundation for getting success in the global trading business and the understanding the need for a plan is part of the reason for global trade success. It is necessary to recognize the target market and assess its product demand patterns. The terms of the trade contract document are of vital importance and should be minutely understood for its information and communication content.

A global trading company is expected to be knowledgeable in the taxes and duties of the nations where it is currently trading. It certainly helps to participate in networking with professionals in global trading to share and discuss regulations of different nations.

For effective international trading, data generation, capturing and reporting in real time is a basic necessity. For this, if there is a general standardized practice in place, then moving merchandise across the international borders is simple.

Even though computerization has made processes very much simple, human intervention is still required to sort out several issues in the international or global trade procedures. This is where the expert knowledge in global trading procedures, comes in handy.

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Brian D Ladin on The History of Global Trade and Shipping

2011
06.30

The history and importance of global trade and shipping can be categorized on time-lines into five sections, beginning with Ancient, Middle Ages, Early Modern, Late Modern and Post War.

Ancient records starting from the 19th century BC showed the presence of a colony of Assyrian merchants at Kanesh in Cappadocia. Arabian nomads domesticated the camel and traded in silk and spice from the Far East. Egyptians imported spices from Arabia via the Red sea. Arabian sea shipping vessels launched and would bring goods from India to Aden. The Tyrian fleet traded with the East, in precious stones, ivory, silver and black gold. The Greeks traded with India. Romans traded with India around the 1st century. Silk Road enabled the Chinese to trade with the Romans, Persia and India.

In the middle ages, the Abbasids traded imports and exports with India and China using the entry points of Alexandria, Aden, Damietta and Siraf. China’s greatest port Guangzhou was an international port around 618-907. Later, Quanzhou assumed greater importance in 960-1279. Indian merchants traded musk, ambergris, camphor and sandalwood in Yemen. In 850, 1150, and the 14th century, India was exporting spices. In 1157, England exported goods from Hanseatic League trading cities.

The early modern era of global trading starts with Vasco da Gama’s landing in India and establishing a sea route from Europe to India around 1530. The Dutch East India Company is formed in 1602, and trades in the East Indies, until 1799, when it goes bankrupt.

In the late modern era, Japan trades with the Portuguese and the Dutch. By 1815, Europe and Sumatra are trading in nutmeg and Grenada in involved with the spice trade. America also joins the spice trade and in 1860 Britain and France agree to free trade.

Post war trade starts off with the international economic structure, the Bretton Woods system coming into effect in 1946. By 1947, General Agreement on Tariffs and Global Trade Procedure is agreed to by 23 countries. A common commercial policy is established in 1958 for the European Economic Community. In 2002, the European Union launched the euro in cash.

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Brian D Ladin Global Trade Procedures

2011
04.03

Global trading is not a novel thing. Import export business or global trade has been running on for centuries even in the absence of hi-tech technologies. But nowadays success in global trade requires you to be adept in the documentation in addition to bank dealings. For SMEs, reformation in global trade procedure has made things simple. Getting the information and documents fundamental for conducting trade overseas is a much more efficient process with the introduction of the internet to global trade. It has come as a boon for exporters and importers as the capability to handle banks, customs and global business openly impacts your clients’ satisfaction.

Global Trade Procedure Schedules

In global trading situation, you are dependent upon customs for quick clearance of products. Dealing with this matter requires you to have knowledge of how global trade works, selling, running the channels, contract terms, source classification, risk minimization, logistics, credit assurance and form of payment. All this requires cautiously building clear vision for your global trade procedure. You got to have clear cut international marketing plan. Having recognized your target market and assessed product demand patterns you should also take care of the following steps.

1. Carefully understanding the terms of the trade contract document

2. Observe the applicability and impact of information and communication

3. Adding techno-legal parts, so as to examine the prospect of making online links in the overseas trade with your importer or vendors.

Global Trade Customs Procedures

The foundation of getting started and achieving success in the International market is understanding procedure. Sometimes, dissatisfaction may lead to imagining things about customs. In fact, customs make easy legal global trade to the highest permissible level in accordance with applicable global conventions and instruments developed by the World Customs Organization. Customs also preserves efficient controls in order to fight unlawful trafficking of merchandise. This is the reason why customs calls the shots in determining the charges of duty, not the importer. While the way you handle customs in your global trade not just impacts client satisfaction, saving of customs duty certainly will have an effect on your bottom line.

Other primary institutions are banks, insurers and financial services, other government authorities and worldwide carriers.

To succeed as a global trader, you must be ready to face numerous hard challenges which include:

1. Being able to recognize and pay the minimum amount of legally permitted taxes and duties for each nation you are trading in.

2. Business networking with professionals to understand countless and difficult regulations for different nations

3. Capturing the data for effective planning and report trade and custom expenses just in time

4. Putting in place a consistent practice to reduce tax and smoothly move merchandise across global borders

Keep in mind, even though nearly all of the things have been computerized, human involvement is still pretty much vital part of effective import and export within global trade procedure. Playing your cards cautiously, at each step is the only way to victory.

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Brian D Ladin on the Internet and Companies Going Global

2011
03.16

The internet has opened many doors for many people, corporations, industries and even countries with achieving success in global trade The nature of the internet keeps us informed of what is going on around the world every day. It has made it possible for small companies to make a large audience aware of their products and services. It has allowed people to work from their homes instead of from costly offices. The internet has taken many companies from local distributors to global conglomerates. Let’s take a look at how the internet has played a major role in industrialization through the ocean shipping industry.

International trade was formerly not possible for a lot of countries. However, with the ability to communicate with investors and customers worldwide, many small countries have been able to expand businesses globally. The shipping world was already making great strides toward making international trade a reality for smaller and smaller businesses when the internet started making it possible for these businesses to actually utilize these services.

Business and industrialization has boomed over the last few decades. The internet has not only allowed small companies and isolated countries to do international business, but it has improved the ocean shipping industry to the point where we can safely and quickly do business overseas.

To ship imports and exports effectively by ocean freight is actually a very complicated system. It consists of a lot more than putting something on a boat and taking it to another country. Ports employ thousands of people and some even support the economy of entire countries. When something is shipped, it has to comply with the laws and guidelines of every country that it will be going through for every form of transport that will be used to get the goods to their final destinations. Every country has its own laws, customs specifications, and tariffs. Even a countries customs and traditions can have an impact on how your freight is shipped. This is where the internet makes a huge difference.

The ocean freight and ocean shipping industry uses intricate logistics systems to comply with all of the ground, waterway, rail and ocean shipping guidelines. They keep track of containers, cargo, loans, money collection, customs requirements, freight forwarding, insurance, and required forms that must accompany every shipment. Companies and individuals that import and export goods rely on the competency of the ocean shipping companies and their logistics systems to avoid delays and ensure that the process is a simple and profitable one.

The internet allows companies to easily communicate with their shipping provider. This one advancement has allowed industries and companies to avoid major delays and has made importing and exporting a streamlined and timely process. With electronic forms, tracking, and e-mail communication, multinational corporations can save precious time and money, ultimately passing the savings on to their clients and making business possible for many companies that would otherwise be confined to local operations.

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Brian D Ladin on the Reason for Going Global

2011
02.11

Companies engage in international trade via imports and exports for three primary reasons:

* expand their sales;

* acquire resources;

* diversify their sources of sales and supplies.

Expand Sales. Companies’ sales are dependent on two factors: the consumers’ interest in their products or services and the consumers’ willingness and ability to buy them. The number of people and the amount of their purchasing power are higher for the world as a whole than for a single country, so companies may increase their sales by defining certain markets in international terms. Part of securing business success is global trade, explains Brian D Ladin.

Ordinarily, higher sales mean higher profits, assuming each unit sold has the same markup. Profits per unit of sales may even increase as sales increase. Increased sales are thus a major motive for a company’s expansion into international trade. Many of the world’s largest companies derive over half of their sales from outside their home country which is why proper management of global business activities is vital .  However, smaller companies also may depend on foreign sales.The National Association of Manufacturers classifies about 150, 000 U. S. companies as small, that is, having 400 or fewer employees and total annual sales of less than $70 million. Together, these small companies account for over 20 percent of U. S. manufactured exports. Many small companies also depend on sales of components to large companies, which in turn sell finished products abroad.

Acquire Resources. Manufacturers and distributors seek out products, services, and components produced in foreign countries. This practice has advanced, due in large part, to the introduction of the internet to global trade. The relationship between companies going global with internet cannot be underestimated. They also look for foreign capital and technologies they can use at home. Sometimes they do this to reduce their costs. The potential benefits of this practice are obvious: Either the profit margin may be increased or the cost savings may be passed on to consumers, who will in turn buy more products, thus producing increased profits through greater sales volume. Sometimes a company buys abroad in order to acquire a service not readily available within the company’s home country. Such a strategy may enable a company to improve its product quality and/or to differentiate itself from its competitors – in either case potentially increasing its market share and profits.

Diversify Sources of Sales and Supplies. To help avoid wild swings in sales and profits, companies may seek out foreign markets and sources of supplies. Many companies take advantage of the fact that the timing of business cycles – recessions and expansions – differs among countries; that is, sales decrease in a country that is in a recession and increase in one that is expanding economically. In addition, by obtaining supplies of the same product or component from different countries, companies may be able to avoid the full impact of price swings or shortages in any one country.

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Brian D Ladin Franchising Benefits

2010
05.03

Brian D Ladin Franchising Benefits

Franchising is more beneficial especially when a company wants to expand business globally or even into other states, where it has to wait for government approval and other formalities explains Brian D Ladin. Even if happens, the company may not have the expertise to market their products in that particular place due to various reasons. Franchising is the best option for any company wanting to expand its business according to Brian D Ladin. It will drastically reduce capital outlay, operations, marketing and all headaches.

For most of the companies, expanding their business in a different place isn’t worth the effort as there is always a risk of failure; however, business owner need to realize achieving success in global markets or even simply outside of the established business arena.  But, when franchising, you are going to give it to someone else capable of carrying your brand, says Brian Ladin. You don’t have to spend a fortune to establish but can receive a percentage of sales from the franchisee every month irrespective of the sales figures. Franchise financing options are also available. Moreover, you have the final say in most of the important decisions.

Almost 40 percent of the revenue comes from franchises. Most of the companies planning to expand are simply franchising their business so that they get a steady stream of revenue without any hassles of running a branch in an unknown land. If you want to expand your business, consider licensing to a franchisee as they have an understanding of the investment and also have the time and resources to build your brand image increase bottom line. Create an effective Franchise Business Model with Brian Ladin today to grow your business worldwide.

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Brian D Ladin Franchise Financing

2010
05.03

Brian D Ladin Franchise Financing

Franchise Financing – Prospective franchisees want to know what is involved in obtaining the proper financing for their business,  explains Brian Ladin. Many new franchisees are not aware of how franchises are financed and what’s involved, so let’s share some critical information in this exciting and growing industry and the many benefits of franchising. Statistics show that franchises are in fact a huge part of the economy, and business and consumer franchises are involved in virtually every industry explains Brian D. Ladin.

Franchising is not at all a new concept. We witness many franchises in our everyday lives as there are plenty of chains all over the country and even some that have achieved success globally, explains Franchise Developer, Brian D. Ladin. These franchises have some control over the chain and run them almost independently. In a nutshell, franchise is a business established under an authorization to sell a company’s goods and services in a different area.

For example, Company A in New York wants to expand its business Boston, it may open its branch or an outlet there, but what if the company doesn’t have the time and resources to sell their products in Boston? This is why many companies, willing to expand business opt for franchising so that they don’t have to handle the operation which is resource and time intensive, says Brian D Ladin. Franchise Directories help with the process of expansion and are a great resource to business owners.

There are many entrepreneurs who are willing to purchase franchise from companies looking towards to expand their businesses. The investor will sometimes even opt to expand the franchise and manage business globally. The franchise has to sign a contract and terms and conditions which lay out how the franchise have to be run, the quality standards maintained, the back end operations profit sharing etc.

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Brian D Ladin Talks About Franchise Directory Portals

2010
04.07

Over the past ten years we have seen an explosion in internet advertising as everyone has jumped into using this fantastic new medium for promoting their product or services. Some business in large part, have utilized the internet to expand globally.  A particular area which has had niche but heavy growth has been that of franchise advertising and there are now hundreds of sites across the globe dedicated to bringing franchise opportunities and franchise information to the masses.

Brian D Ladin, in looking at these franchise directory portals, notes, we can see a huge variation in the information they have to offer and we can group these into the following:

Franchise directories – These function and serve solely to display franchise opportunities in a directory format and generally display logos and promotional materials in a categorized format.

Franchise information portals – These tend to go one step further than simple directories and also offer advice and articles to a prospective franchise seekers as well as a categorized list of franchises and sometimes even franchise finance information.

Brian D Ladin on Franchise Resource Portals

These have all of the above features and more, offering franchise advice, franchise articles, dates of franchise exhibitions, reviews, categorized franchise opportunities, franchise news and web 2.0 user interaction. Some of these portals will provide information on expanding your company into the global arena.

We can look at the above in a staged way where 1 is a skeleton platform, building up to 3 which is a full bells and whistles platform. When looking at these franchise directory platforms one must remember that the main aim of the site owners is to have paying franchisers list their franchise on them; this is where the money comes from and why the site is in existence. So, you must remember that not necessarily all are ethical franchise directories. Although there are many that are happy to take on the world in order to effectively advertise their franchise.

The trick to finding which an ethical directory is, is to look for what is called “Web 2.0″ features. These features would include comment areas under articles, forum areas and general networking areas that will provide more information on the  potential standard of investment. Most franchise directories do not want these features as they know that they will get disgruntled ex-franchisees in there making remarks about the least ethical franchises on their directory but you will find the more ethical directories are happy for people to voice their opinions and happy to boot any less ethical franchises from the directory.

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