Alternative Investment Management Association Representing alternative asset managers globally
AIMA's Glossary has been developed for all those with an interest in the alternative investment industry - from the beginner to the advanced practitioner.
You will find a considerable overlap of content with the traditional fund management industry - the instruments used, the service providers employed, etc. However, the hedge fund industry is individual in the way in which it uses these resources.
For reasons of law and accuracy, this is not a wiki. It is a work-in-progress, however, and we invite you to submit new items for inclusion below (including the proposed definition).
The Gain-Loss Ratio is the ratio of the expectation, under a threshold risk adjusted probability measures, of the positive part of the excess payoffs of a portfolio to the expectation of the negative part of the excess payoffs of a portfolio.
A contract executed by one broker (the execution broker) for the client of another broker that the client orders to be turned over to a second broker (the carrying or clearing broker). The execution broker collects a fee from the carrying broker.
Global Macro funds aim to profit from changes in global economies, typically brought about by shifts in government policy that impact interest rates, in turn affecting currency, stock, and bond markets. They participate in all major markets – equities, bonds, currencies and commodities – though not always at the same time. Global Macro funds use leverage and derivatives to accentuate the impact of market moves. They also utilize hedging, but the leveraged directional investments tend to have the largest impact on performance. Some funds may focus their efforts on a reduced number of positions. Most global macro funds follow a top/down type management process. As a result, the importance of stock picking is reduced in comparison with the asset allocation process (both strategic and tactical). Due to a large exposure to stock, bond, currency and other markets, Global Macro is regarded as a Multi-Directional strategy.
A Governing Body generally supervises and oversees the conduct of its Fund's affairs, even though it will delegate day-to-day functions to other parties such as the Investment Manager and Administrator. The composition of the Governing Body will depend upon the Fund's structure and jurisdiction: 1. A Fund established as a Company will have a Board of Directors as the Governing Body. The Board may include representatives of the Investment Manager, and directors selected by the Investment Manager, although there is an increasing trend for independent non-executive directors of stature to be appointed to hedge fund Boards. 2. A Fund established as a Partnership will usually have a General Partner as Governing Body. Typically the General Partner will be the Investment Manager. 3. A Fund established as a Trust will have a Trustee as the Governing Body. The Trustee is usually an independent licensed company.
Gross exposure is calculated by adding the percentage of the fund's equity invested in short sales to the percentage of its equity used for long positions. In both cases, the exposures often exceed 100% because they do not account for the use of leverage. See also Net exposure.
A third party,(individual, company or trust) to a Margin Lending facility who provides collateral (in the form of cash, securities or managed funds) to support a Margin Loan.
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