easuring Investment Performance. International Investments. Hedge Funds and the Madoff Scandal

easuring Investment Performance. International Investments. Hedge Funds and the Madoff Scandal Essay example
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Finance & Accounting
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Finance and Accounting Name of Student (author) Student ID Number: Course Name: Professor’ Name: Name of School (University) Word Count: 1,173 Date of Submission: August 21, 2011 Finance and Accounting Introduction The global financial market is in great turmoil today, as shown by the wild swings in the major stock markets during the past few days and weeks…

Introduction

Measuring Investment Performance – the traditional view that a portfolio manager is to be measured over an entire market cycle is because most people leave their funds to be managed and do not worry too much about market fluctuations. These ordinary investors expect that their monies placed with portfolio managers will grow over time despite the ups and downs of market movements or gyrations. In short, these people expect their capital will grow accordingly and are in safe hands because they believe they had hired the portfolio managers precisely for this type of risk management. They think the cyclical nature of markets will protect their investments no matter what happens, because they believe markets will eventually recover in the long run. This type of thinking or mentality does not take into account the existence of other investing methods such as short-selling, leveraging (buying stock on margins), hedge fund investing and other kinds of esoteric investment instruments such as puts, call, options or other derivative instruments that can typically yield them higher returns without necessarily increasing the investment risks. ...
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