Do Hedge Funds Trade?
I am wondering what kind of trading and the amount hedge funds do as compared to say one of the big banks (i.e. Lehman, Bear, etc.) and if trading in a HF is exciting and fast as it is in other places.
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Some Hedge funds account for >10% of the trading on the major stock exchanges in any given day.
SAC trading accounts for 5% of the daily volume of major exchanges.
Well, hedge fund have to buy the assets they want. When they figure out what they want to buy, unless this is a quasi pe transaction, their execution traders, or maybe the portfolio manager, if it is a small shop, call a few sell-side desks, get some quotes, and generally take the lowest price.
Now if you are talking about hedge funds that make very quick trades, take a look at Citadel, Renn Tech, DE Shaw, Amaranth (before it blew up), etc. Read "When Genius Failed." Most of those guys previously prop traded on the sell side.
"Hedge fund" is such a generic term nowadays. What kind of HF are you asking about? Equity? FI? Commodities? Activist? Arbitrage? Global Macro?etc...there are so many variations on so many different asset classes that your question really has no basis.
Like some of these other posters pointed out, a fund like SAC may account for 5% of the volume on a given exchange. However, look at firms like Third Point or Pershing Square - these guys are activists and are not trading big volume day in and day out.
How about a Global Macro Fund. What kind of trading goes on there?
Any and all strategies that at that time are yielding the highest returns (or more appropriately, the chances of the highest returns). A true global macro fund will find an opportunity based on a "macro" event anywhere on the "globe", and then try to implement arbitrage strategies based on the outcome of said event - whether it be the local currency, bonds, or equities.
Global macro doesn't denote arbitrage (well you can make anything an "arbitrage" trade...but it isn't arbitrage in the way the term is generally used). Basically fx, fi, equity indexes traded directionally based on the managers discretion. Systematic global macro generally refers to trading those products with a simple trend following strategy. Think George Soros, Kovner, PTJ.
And a previous poster hit it on the head...HFs are too diverse to be pigeonholed. Some trade a lot...others don't.
Mahras - are you trying to tell me that PTJ is an index trend follower? I think you need to read up a little more on who this guy is and what he has done, Soros & Robertson too.
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