What Is A Hedge Fund?

While hedging is a term used to describe risk management, a hedge fund is an entirely different subject.

A hedge fund is a managed portfolio of investments that uses advanced investment strategies to maximize returns, either in an absolute sense or relative to a specified market benchmark.

Hence, hedge fund jobs are often diverse, they require a combination of portfolio managers, accredited investors, and research analysts to pool together towards a singular goal.

As a brokerage firm, Orient Futures participates in this process of investment by delivering services and seamless access to the global markets.

To date, Orient Futures possesses memberships from Singapore Exchange (SGX), Asia Pacific Exchange (APEX) and Intercontinental Exchange Singapore (ICE SG), while more plans to attain clearing memberships remain within our prospects.  

 

How To Qualify As A Hedge Fund Investor?

Onshore hedge fund investors are required to have a net worth of a certain value. In Singapore, he/she needs to have a minimum of S$ 2 million (excluding property value), or the individual must have evidence of having earned S$300,000 or more in the past 12 months.

To access the requirements and documents needed for Singapore domestic onshore hedge fund investors, head to the MAS official page.

Similarly, Offshore, or foreign hedge funds are subjected to the rules and regulations of the respective country of origin.  

Apart from legal requirements for the hedge fund, it is also important to understand that there are different governing organizations for each entity that is part of the trading process. Broker-dealers (such as Orient Futures Singapore), corporate finance advisers, and various other roles fall under the regulatory standards of the Securities and Futures Act (SFA).

Other roles such as licensed trust companies are governed by Trust Companies Act, while financial advisers are governed by Financial Advisers Act.

For the full list of governing organizations, refer to the table from the Monetary Association of Singapore here.  

 

What Are The Avenues For Trade?

Hedge Funds are allowed to invest in stocks and bonds; however, they can also invest in commodity futures or forex with a broker.

The avenues for trade and types of trade are diverse. Orient Futures Singapore offers brokerage services to a substantial list of exchanges such as SGX, APEX, ICE SG, HKEX, INE, ZCE, DCE, JPX, and all other exchanges listed here.

In relation to exchanges and access to the market, Orient Futures Singapore also values seamless access to the Chinese markets, this is accomplished through the securement of various trading exchanges such as the DCE market.

Therefore, institutional hedge fund investors that are seeking to execute strategies are welcome to use these avenues of trade to achieve a positive investment portfolio.
 

Graph With Statistics


Hedge Fund Trading   

Strategies are an integral part of hedge fund trading, as with all forms of trade, each strategy contains different types of portfolio risks and is highly dependent on the risk tolerance of the individual or corporation involved.

To date, existing material on each strategy’s strengths and weaknesses are comprehensive. Non-profit organizations such as CFA Institute have noted in the syllabus that some hedge fund strategies may have higher portfolio diversification benefits, while others may simply be return enhancers rather than true portfolio diversifiers.

In general, it has been noted that traditional limited partnership formats have now grown to include liquid alternatives, thus, the overall consensus is that the choice of strategy should align with the medium of trade.

For example, based on research by CFA, returns of managed futures strategies typically exhibit positive right-tail skewness during market stress. This may be a factor to consider when making a hedge fund investment.

 

About Hedge Fund Pay Structures

Apart from hedge fund investors, one of the most crucial roles of hedge fund structures is the hedge fund manager.

Most hedge fund managers usually follow a “2 and 20” fee expense ratio. It refers to a performance fee charged by the manager for 2% of the assets and 20% of the profit every year.

Investors can ask about the fees and expenses and information should be made transparent between investors, traders, and managers.

To ensure that funds are not misappropriated, many hedge funds undergo an annual financial audit by an independent auditor that includes verification of the existence of fund assets.

 

Existing Hedge Funds

Currently, Singapore hosts a few notable hedge funds, however, apart from Singapore a few other famous hedge funds include the:

  • New York Blackrock Advisors, (United States)
  • Greenwich conn. AQR capital management, (United States)
  • Westport, conn. Bridgewater Associates to name some. (United States)

While Singapore does not have as many hedge funds, it is a good place to break into the market. According to Business Times, a possibility is that the “Singapore stock market itself is not a very liquid vehicle for these hedge funds so they’ve been forced to look globally”.

Additionally, while the above example shows Singapore and American hedge funds, hedge funds in India, UK, and all other countries are constantly entering the market, and the competition to become the best hedge fund is always high. To date, the world’s biggest hedge fund (Bridgewater Associate) has even bet $9.5 billion against certain stocks.   

In response to the constantly evolving trade, access to the international market remains the main goal of services from Singapore brokerage firms and intermediaries to the world. 
 

Start Trading With Orient Futures Singapore 

Being an Overseas Intermediary of Shanghai International Energy Exchange (INE), Dalian Commodity Exchange (DCE), and Zhengzhou Commodity Exchange (ZCE), when foreign clients participate in internationalised futures contracts in these Chinese markets with us, they have direct access to trading, clearing, and settlement. Our parent company, Shanghai Orient Futures, is the largest broker in terms of aggregated volume across the five regulated exchanges in China.

Orient Futures Singapore also currently holds memberships at the Singapore Exchange (SGX), Asia Pacific Exchange (APEX), and ICE Futures Singapore (ICE SG).

We provide premium customer service at an affordable cost to all our clients. Our team will be there for you 24 hours on trading days to provide a one-stop portal for all your trades, with simple processes and an intuitive user interface that has low or near-to-zero latency.