Construction And Research Of Chinese Hedge Fund Rating System

With the improvement of China's financial markets, the varieties of transactions are becoming increasingly richer, securities lending, commodity futures, stock index futures, stock index futures options, the upcoming commodity futures options and other trading varieties provide investors with more and more hedging instruments, hedge funds has entered the fast lane of development in our country, and it has been collecting increasing awareness, recognition and acceptance among investors. The difference between Hedge funds and traditional actively managed funds, index funds in risk-return characteristics also brings a high value for the allocation into hedge funds and gains investors' favor.As of the end of December 2015, China's fund industry association had registered 25505 private equity fund managers, private equity funds had been filed 24054, registered capital had subscribed 5.07 trillion yuan, paid-in capital had been booked 4.05 trillion yuan, private equity practitioners had registered 379.4 thousand. The explosive development of hedge fund industry, on the one hand provides investors with more investment options, on the other hand also brings problems in the selection of fund products and allocation of investment assets. To address these challenges, we need to establish a relatively complete set of hedge fund rating system to help individuals or institutional investors for product evaluation, selection and allocation.Currently in China, hedge funds is still at a preliminary stage of development, the market is relatively unfamiliar with the operational characteristics of hedge funds and the performance rating of research of hedge fund is still relatively lacking, investors may hardly have enough analytical and judgment ability when selecting hedge fund.The current evaluation system of the Fund follows the traditional evaluation system. However, compared with the traditional securities investment funds, hedge funds have a unique risk-return characteristics. On the one hand, the traditional securities investment funds tends to hold stocks or bonds of long positions, whereas hedge funds can not only hold long positions, but also use commodity futures, financial futures, options and other financial derivatives to hedge long positions, or even hold net short positions, reflecting the huge difference between the hedge fund holdings as well as the underlying direction of the trade and the traditional securities investment funds; on the other hand, subject to operational strategies and characteristics, the investment cycle of hedge funds is relatively long, and is often with a longer lock-up period, some hedge funds may use arbitrage strategies based investment model which has smaller absolute return, and sometimes the use of leverage to further expand the scale of investment. At the same time, the risk is also amplified. Thirdly, the barriers to entry for investors in hedge funds set high, generally 100 million yuan, which also highlights the importance of investment in the product selection process.For the above characteristics of hedge funds, on the basis of existing securities investment funds, money funds and other types of fund ratings theories, this article strives for adding a part of innovative indicators that is more suitable for the evaluation of hedge fund, such as adding a credible hedge fund industry performance benchmark index, rather than simply to the Shanghai and Shenzhen 300 index or other traditional evaluation criteria. Meanwhile, the current majority of the fund evaluation system of domestic market are built in accordance with its designer's ideas, and cannot meet the demand of other investment institutions and investors, and this article will proceed from the point of view of more investors, adding indicators that investors are more concerned about, and strive to make a stronger practical and targeted hedge fund rating system.This article will use quantitative method combined with qualitative research method to build a relatively complete set of hedge fund rating system. Quantitative research mainly research and analyze five areas:profitability risk, profitability of hedge funds, risk-adjusted hedge fund after fund managers and contract management capacity. Qualitative research methods focuses on indicators like management ability analysis of hedge fund managers that is difficult to quantify, including the adequacy of the company organizational structure, core investment research personnel background, whether there are reasonable internal control system and implemented, whether there is a firewall system and get execution, whether trading systems and disaster recovery system is perfect, to draw a composite performance scoring of qualitative research. the qualitative research component composite score. Qualitative research and quantitative research methods will be mainly used in the evaluation index weight distribution, and strive to achieve a fair and equitable distribution of indicators. Finally, this paper will use case analysis for the analysis and rating of sample hedge funds.Finally, we will rate hedge fund products according to the comprehensive score.rating standard is divided into five degree, in the hope of the rating system constructed in this paper can have stronger practicability.