Risk and Quality Management Assignment Example | Topics and Well Written Essays - 1250 words

Risk and Quality Management - Assignment Example Analysis of Risk Management schema (2011) 5 Conclusion 6 Sources Cited 7 Appendix 9 Introduction Hedge stemmas implement a number of different luck focussing strategies for large scale metropolis management for privy individuals, trusts, pension bloods, and other corporate investors seeking return that beats the market averages in order to plow wealth. Some of the risk management strategies used by the Paulson & Co hedge fund include long-short strategies, portfolio diversification, fusion arbitrage, quant computer trading, momentum trading, or distressed asset accumulation. (Barufaldi, 2011) The first imperative of any hedge fund is that it does not lose money on any investment, or in the fund as a whole. The most successful hedge fund managers have such a large amount of uppercase under management that their investments may move the stock markets and inform other traders. Because of this, large scale capital management, as practiced by Paulson & Co. and other hedge funds, must proceed under unique constraints or restrictions to risk management in seeking to outperform not only the market indices in returns, further also in outperforming other hedge funds, mutual funds, private equity groups, and venture capitalists. This essay provide analyze the use of risk management strategies in financial investments made by the by Paulson & Co hedge fund in order to determine the appropriateness of their application in wealth management. Paulson & Co - Risk Management in Hedge Funds illusion Paulson is a New York native and Harvard potash alum who founded his own hedge fund, Paulson & Co., in 1994 on Wall Street. In 2005, Paulson developed a long-short risk management strategy for the fund that placed a large amount of capital in investments that were short the subprime mortgage market through a variety of means including shorting bonds, banking stocks, and real estate, as well as assembling credit default s wap insurance obligations that were related to derivative exposure. (Zschoche, 2008) According to experts, Paulson & Cos risk management strategies paid off by returning 590 % in one fund and 350 % in some other for a total of over $3.7 Billion USD. (Zschoche, 2008) The details of this investment strategy are retold in a book by Gregory Zuckerman, published in 2009, The Greatest Trade Ever The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History. (Zuckerman, 2009) Paulson and Co. reported over $29 trillion USD in total assets under management in 2010, making it one of the largest hedge funds in the world. (SharpeInvesting, 2010) Nevertheless, media reports call forth that the firm is down 20% in 2011, making a further review of the hedge funds recent risk management strategy since the 3rd quarter of 2010 in need of analysis. Paulson & Co. new History Following Paulsons success in the worlds greatest trade in 2007-9, the hedge fund implemented an investment long term risk management strategy that heavy favored gold. Paulson & Cos risk management strategy then involved placing more than $3.8 billion in gold bullion through ownership of the SPDR Gold Trust ETF (NYSEGLD) . (Johnston, 2010) This investment included a total percentage of 16% of the total SPDR Gold Trust ETF in 2010. (Katz, 2010) The hedge funds broad strategy following the market crash of 2007-9 was to hedge the currency inflation inherent in Quantitative