General Background Of Vega Asset Management

According to Bloomberg Business Week, Watershed Capital Management, L.L.C. (WAM) is an employee owned hedge fund sponsor. The firm provides its services to pooled investment vehicles. It also caters to institutional investors primarily endowments and foundations. The firm invests in the public equity and fixed income markets across the globe. It typically employs special situation investing approach to make its investments. Watershed Capital Management was founded in July 2002 and is based in San Francisco, California.

To reach their target of achieving "absolute return", hedge fund managers are free to utilize various strategies and techniques. Some of these are mentioned below:

Short Selling: It comprises selling of that security which is not owned by you in a sense that you do not anticipate procuring it on a reduced cost in near future.

Arbitrage: It includes procuring as well as sale of a financial instrument in more than market to generate maximum profit from the difference between the prices.

Hedging: Procuring or selling of a security to compensate some potential loss on an investment.

Leverage: It refers to the borrowing of money to meet investment purposes.

Let’s now consider some of the facts about hedge fund:

Ø Hedge funds industry is one of the fastest growing industries of today.

Ø Number of hedge fund strategies aim at minimizing market risk particularly by shorting equities or derivatives.

Ø Generally, one would find hedge funds highly specialized. Moreover, they depend on the particular proficiency of the manager or management team.

Ø Like contemporary equity or mutual funds which are entirely exposed to market risk, various strategies specifically relative value strategies, in hedge funds do not rely on the direction of the bond or equity markets.

Ø Several hedge funds strategies specifically like arbitrage strategies keep a limit to the amount they intend to employ successfully prior to the diminishing of the returns.

Ø Hedge funds managers are not only highly professional but they are also diligent and disciplined.

Ø Hedge funds have some outstanding performers other than the averages.

In the end, investing in hedge funds is preferred by most of sophisticated investors. It is due to the fact that these investors have experienced as well as comprehend the consequences of major stock market corrections.

Ravinder Mehra laid the foundation of Vega Asset Management in the year 1996 with the initial investment of just $25 million. Thus it is evident that Vega Asset Management background is not very old. Their target was the middlemen of the hedge-fund world. These middlemen were recognized groups of professionals who had wealthy investors and they used to remain in search for the next hot hedge fund. Consequently, by the year 2004 Vega had established its offices in Madrid, London and New York and soon it had hold over more than $12 billion. Thus, it acquired the designation of the largest fund in Europe and began to be counted as one of the biggest funds in the world.

Mr. Mehra made sure that the investors were getting what they wished to have and thus rose to prominence. India is the birthplace of Mr. Mehra and he had shown his marvelous trading at Citigroup Inc. and HSBC Holdings PLC before he became a part of Spanish bank Banco Santander Central Hispano in the year 1990. It was in 1996 that he launched his first Vega fund with his coworker Robert Slutz. Within the time span of 2 years, Vega formed its roots with seed capital from Santander.

The strategy which was followed to attract the investors was to enable the investors to withdraw their amount every month provided they give a notice of 30 days. No doubt, it was a more lenient redemption policy compared to most of other hedge funds. In addition to this, Vega makes it sure that the rational and details of its big trades are shared with the investors. Risk management techniques implemented at Vega compelled the firm to discard position after a considerable loss.

Vega select fund has been a best performing fund and it has scored about 12.4 percent annual return since 2000. This performance stands in line with other ‘macro’ hedge funds which are considered best for broad economic trends. But this average is not up to the expectation of Mr. Mehra, as he aims to reach at the 25 percent average return. In addition to this, four funds of Vega out of total five could have returned less than 7 percent in a year from the time they were launched.

According to some investors who had passed through Vega, the justification is not established between the firm’s return and market volatility. Though it faced some period of loss; but it has been able to re-bounce from those big declines in the past in the years 2002 and 2005. Investors of Vega are quite aware of the volatility.

The losses of Vega have been compared with Amaranth, but this point is to be considered here that there is a huge difference between the losses of these two. Vega has remained open about its dealings in trades with the investors; the risks that are involved in the trades are not exception to it.