So aside from the fact that you can choose your risk level( via tranche selection) with a hedge fund CDO what’s the difference between them and a FoF. They pretty much sound like the same thing to me…
You are in alot of trouble mate.
If i knew everything I would not be on this forum would I? Thanks for the constructive criticism…
Sayhuh? Wrote: ------------------------------------------------------- > So aside from the fact that you can choose your > risk level( via tranche selection) with a hedge > fund CDO what’s the difference between them and a > FoF. They pretty much sound like the same thing to > me… CDO Tranche - Constructed by a structured finance group at an investment bank. HF is the purchaser of these products and will seek out traches that reap the optimal risk/reward tradeoff. FoF - Fund that allocates money to various hedge funds. Not the same mate.
Perhaps I should have asked my question differently. My Kaplan book says the following abut HF CDOs: " HF CDOs are backed by investments in hedge funds. The CDO trust will sell tranches of securities that are backed by one or more hedge funds with various strategies. The use of HFs as collateral for a CDO structure is a rapidly growing area in the market…" To me it looks like investing in a HF CDO is the same thing as investing in a FOF. Is it that the CDO has some kind of credit enhancement that comes along with it so that institutions that could not normally invest in a FOF can get the same kind of exposure via the CDO?? thanks for your thoughts…
I answered my own question fellas. Check out this paper if you’d like to know more… http://www.hedgefundprofiler.com/Documents/111.pdf