1] ABN AMRO Bank ABN AMRO Bank N.V. is a Dutch state-owned bank with headquarters in Amsterdam.

It was reestablished, in its current form in 2009, following the acquisition and break-up of the original ABN AMRO by a banking consortium consisting of Royal Bank of Scotland Group, Santander Group and Fortis. Following the collapse of Fortis, who acquired the Dutch business, it was nationalized by the Dutch government along with Fortis Bank Nederland.

The bank is a product of a long history of mergers and acquisitions that date to 1765. In 1991, Algemene Bank Nederland (ABN) and AMRO Bank (itself the result of a merger of the Amsterdamsche Bank and the Rotterdamsche Bank in the 1960s) agreed to merge to create the original ABN AMRO. By 2007, ABN AMRO was the second-largest bank in the Netherlands and the eighth-largest in Europe by assets. At that time the magazine The Banker and Fortune Global 500 placed it 15th in the list of worlds biggest banks and it had operations in 63 countries, with over 110,000 employees.

In October 2007, a consortium of the Royal Bank of Scotland Group, Fortis and Banco Santander, known as RFS Holdings B.V. acquired the bank, in what was the world's biggest bank takeover to date. Consequently, the bank was divided into three parts, each owned by one of the members of the consortium. However, RBS and Fortis soon ran into serious trouble: the large debt created to fund the takeover had depleted the banks' reserves just as the financial crisis of 20072010 started. As a result, the Dutch government stepped-in and bailed out Fortis in October 2008, before splitting ABN AMRO's Dutch assets (which had primarily been allocated to Fortis) from those owned by RBS, which were effectively assumed by the UK government due to its bail-out of the British bank. The operations owned by Santander, notably those in Italy and Brazil, were merged with Santander, sold or eliminated.

The Dutch government appointed former Dutch finance minister Gerrit Zalm as CEO to restructure and stabilise the bank, and in February 2010 the assets it owned were legally demerged from those owned by RBS. This demerger created two separate organisations, ABN AMRO Bank N.V. and The Royal Bank of Scotland N.V. The former was merged with ABN AMRO Private Banking, Fortis Bank Nederland, the private bank MeesPierson (formerly owned by the original ABN AMRO and Fortis) and the diamond bank International Diamond & Jewelry Group to create ABN AMRO Group N.V., with the Fortis name being dropped on 1 July 2010. The remaining parts of the original ABN AMRO still owned by The Royal Bank of Scotland N.V., meanwhile, were renamed, sold or closed.

The Dutch government has said that ABN AMRO would remain state-owned until at least 2014, after which it would consider a public stock market listing for the bank. ABN AMRO in India The Indian operations of ABN AMRO Bank began in 1920 when the first branch was opened in Kolkata. ABN AMRO Bank, a full-services bank, has since expanded operations in 21 cities Mumbai, Delhi, Chennai, Kolkata, Pune, Baroda, Hyderabad, Bangalore, Surat, Noida, Gurgaon, Lucknow, Mangalore, Muradabad, Nasik, Panipat, Tirupur, Salem, Udaipur, Kolhapur and Ahmedabad and has 28 branches.

Awards

ABN AMRO India awarded Financial Times Emerging Markets Sustainable Bank of the year- This is the first time a bank in Asia has won the award. ABN AMRO was also named the overall winner in the FT sustainable banking awards in recognition of its leadership in environmental and social risk management.

Economic Times - Avaya Global Connect Customer Responsiveness Award 2006-Award for 'Most Customer Responsive Company' in Banking & Financial Services Airfinance Journal Joint Asia Deal of the Year- Air India US$ 1.3 bn US EXIM Financing (Sole Arranger) US$ 700 mn Pre-delivery Payments (Mandated Arranger & Bookrunner) Indian Banks' Association - Banking Technology Award 2006 Best Online and Multi Channel Banking MaxTrad - Supply Chain Portal Project Finance Deal of the Year Reliance Petroleum USD 2,000,000,000 Syndicated Loan Facility Mandated Lead Arranger Best Corporate Banking Initiative Supply Chain Solutions Ten most outstanding deals of 2006 / Best Privatization Deal- Airports Authority of India USD 2,400,000,000 Privatisation of Mumbai and Delhi Airports: Sole Financial Advisor Joint Asia Deal of the Year Air India USD 1,300,000,000 US EXIM Financing Sole Arranger USD 700,000,000 Pre-delivery Payments Mandated Arranger & Bookrunner USD 700,000,000 Pre-delivery Payments Mandated Arranger & Bookrunner

Best Research house, Asia :ABN AMRO India Equities India Loan House of the Year' by IFR Asia magazine, December 2006 No. 2 Most Productive Bank in India ,Business Today, January 2005 No. 3 Best Bank in India, Business Today, January 2005 Best at Cash Management Award in September 2001" - The Banker Corporate Finance India : Ranked Second in M&A in the Investment Banking arena in 2001 Economic Times.

ABN AMRO Securities India : Best Foreign Bond House; No 1 Arranger in Private Sector: Euromoney 2000. Top Bank on "Management Quality" parameter: Business India 'Best Banks Survey 2000'. 7th Most Admired Commercial Bank in the World: Fortune Magazine, 2000. Top Foreign Bank in India: Economic Times - CMIE survey 1999. Second overall in Banking Industry: Financial Express - BRIS survey 1999. Source : http://en.wikipedia.org/wiki/ABN_AMRO http://www.rbs.in/India/About-Us/ABN-AMRO-i1/index.htm 2] Warren Buffett on Derivatives Financial Weapons of Mass Destructions I view derivatives as time bombs, both for the parties that deal in them and the economic system. Basically these instruments call for money to change hands at some future date, with the amount to be determined by one or more reference items, such as interest rates, stock prices, or currency values. For example, if you are either long or short an S&P 500 futures contract, you are a party to a very simple derivatives transaction, with your gain or loss derived from movements in the index. Derivatives contracts are of varying duration, running sometimes to 20 or more years, and their value is often tied to several variables. Unless derivatives contracts are collateralized or guaranteed, their ultimate value also depends on the creditworthiness of the counter-parties to them. But before a contract is settled, the counter-parties record profits and losses often huge in amount in their current earnings statements without so much as a penny changing hands. Reported earnings on derivatives are often wildly overstated. Thats because todays earnings are in a significant way based on estimates whose inaccuracy may not be exposed for many years. Another problem about derivatives is that they can exacerbate trouble that a corporation has run into for completely unrelated reasons. This pile-on effect occurs because many derivatives contracts require that a company suffering a credit downgrade immediately supply collateral to

counter-parties. Imagine then that a company is downgraded because of general adversity and that its derivatives instantly kick in with their requirement, imposing an unexpected and enormous demand for cash collateral on the company. The need to meet this demand can then throw the company into a liquidity crisis that may, in some cases, trigger still more downgrades. It all becomes a spiral that can lead to a corporate meltdown. Derivatives also create a daisychain risk that is akin to the risk run by insurers or reinsurers that lay off much of their business with others. In both cases, huge receivables from many counter-parties tend to build up over time. A participant may see himself as prudent, believing his large credit exposures to be diversified and therefore not dangerous. However under certain circumstances, an exogenous event that causes the receivable from Company A to go bad will also affect those from Companies B through Z. Source : http://www.fintools.com/docs/Warren%20Buffet%20on%20Derivatives.pdf 3] Malcolm Gladwell Malcolm Gladwell is a United Kingdom-born, Canadian-raised journalist now based in New York City. He is a former business and science writer at the Washington Post. He has been a staff writer for The New Yorker since 1996. He is best known as the author of the books The Tipping Point: How Little Things Can Make a Big Difference (2000), Blink: The Power of Thinking Without Thinking (2005), and Outliers: The Story of Success (2008). Gladwell's books and articles often deal with the unexpected implications of research in the social sciences and make frequent and extended use of academic work, particularly in the areas of sociology, psychology, and social psychology. Gladwell was appointed to the Order of Canada on June 30, 2011 Source : http://www.goodreads.com/author/show/1439.Malcolm_Gladwell 4] Hedge Funds In order to protect normal people, the SEC has created all sorts of rules and regulations for how companies that invest money on behalf of other people should operate. While this makes the investments safer and less volatile, it prevents the firm making investments from chasing riskier but possibly more profitable investments. WHAT ARE THEY Hedge funds are companies that make these investments. They are not allowed to have more than 100 investors, and they are not allowed to take on any investors with less than $5 million in wealth. Many of their clients are either very wealthy people or institutional investors, such as pension funds, banks, insurance companies, college endowments, or sovereign wealth funds. It's also very difficult to get into a good hedge fund, as not only are they limited by the number of investors they can take on, but they are also rated on the rate of return they earn on assets, and the more money you have to invest, the more opportunities you need to find. If someone offers to let you invest in their hedge fund, remember the Groucho Marx joke about not wanting to join a country club that would have him as a member.

GOALS So hedge funds gather large piles of money from very wealthy institutions and invest it on their behalf. The goal is to do two things. The first is to demonstrate alpha. To explain this concept, think of it this way. If you hear that the stock market went up by 10%, and you look at all the stocks on the market, odds are almost all of them went up. A rising tide lifts all boats. This is referred to as beta. Most assets, or portfolios of assets, will move in the direction of general market. Alpha is finding assets that go up even more than the general market. Anybody can just buy into a fund through say Vanguard, and own the broad market index, and get the above mentioned 10%. People invest in hedge funds to earn an amount above and beyond that 10%. Alpha is supposed to be the ability to find assets that will do this. The other goal of hedge funds is to earn absolute returns. What this means is that they make money every year, regardless of what the stock market does. A few funds have done this, but 2008 demonstrated that most funds were bluffing in saying they were able to do that, and many of them went out of business. HOW DO THEY SET IT UP So based on the above, the hedge fund has a large pile of money, millions or sometimes even billions of dollars, invested with it by various clients. A hedge fund is normally staffed by veterans of the financial services industry, typically people who have worked for a long time at investment banks and have contacts within the industry. After accumulating their investment capital, their frequently turn to investment banks, such as Goldman Sachs, Merrill Lynch, or Morgan Stanley, or commercial banks with investment banking arms, such as Citigroup or Bank of America, to borrow large sums of money to leverage this return. What this means if that if you invest $100 and make 10%, you make $10. But if you borrow $900, and invest the full $1,000 and make 10%, you make $100, then pay back the bank $900 (plus interest), and you made $100 (less interest) for your investors off the $100 they invested with you. (The downside of this is that if you lose 10% on your $1,000 investment, you're down to $900, and your investors are wiped out. This is called blowing up in the jargon, and it happens more than you would think, so leverage can be very dangerous). The banks like to lend to hedge funds though, because they like the interest income, and they like to hear what leads the hedge funds are following (financial services is very incestuous, and rumors drive trades). The hedge funds like to borrow from the banks because, notwithstanding the need for leverage, the investment banks have contacts within the publicly traded companies. Say you're doing a bond offering through Goldman Sachs. Maybe in the process of that, you meet their hedge fund clients, and talk up your business to them to drive demand for your stock, while they hear from the CFO and CEO personally, and make better decisions than the average investor pouring over financial statements. WHAT DO THEY INVEST IN There are a number of recognized investing styles 1) Long short - These are the most simple funds. They buy some stocks, and short other stocks. The desire is to assemble a portfolio that will earn both above average and absolute returns. The concept of going long and short, done to hedge risks, is how the industry got its name back in the 1950s.

2) Global Macro - These funds invest in assets that will give them exposure to broad economic forces, which they hope to predict. Do you think the euro is going to break up? Short it, and euro-denominated assets. Do you think we've hit peak oil? Buy oil companies, and oil futures. George Soros became famous for making billions for predicting that England would be forced to devalue its currency in the 1980s. 3) Directional - These tend to be referred to as "black box funds", meaning that no one knows what their criteria are, as it is a trade secret. Often they write computer programs designed to go through millions of pages of data, and analyze all kinds of data to find mispriced assets and go long or short on them. High frequency traders do this with stocks by setting up a computer near a stock exchange that can buy stocks and sell them again within nanoseconds. I also read about a fund that combs through publicly available filings through the Food and Drug Administration, looking for any changes regarding new drugs, to use as information on pharmaceutical stocks. 4) Event Driven Funds - As the name suggests, the buy or sell short assets whose price will be affected by future events. Merger arbitrage is a common form of this. When one company acquires another, usually the buyer's stock goes down, as they are probably overpaying, while the acquired company's stock jumps, as someone is about to overpay for it. Short the predator and buy the prey. In the movie Wall Street, Charlie Sheen uses contacts with a law firm to find clients of the firm who are planning mergers to conduct this sort of strategy, and is arrested when the feds flip one of his accomplices. The most famous example of this strategy is John Paulson, who made billions off the housing bubble buying credit default swaps on collateralized debt obligations (CDOs). The Big Short by Michael Lewis also analyzes funds that took this approach. (I believe Paulson is now following a macro strategy, and has been buying up gold mines, evidence that funds can change strategies). 5) Fund of funds - This is a hedge fund that invests its money in other hedge funds. By diversifying among various funds, the hope is that returns will be less volatile and safer. If one fund blows up and loses all its money, that might be 5% of your investment rather than 100%. There is a pretty long list of other recognized strategies, many too complicated to worry about here. (For example, the Galleon hedge fund, which was in the news recently, was using contacts in consulting firms and other places to obtain and trade on inside information. The founder is now facing 15 to 19 years in prison. It was an effective strategy, but one that obviously had severe consequences.) But the point of this is to indicate that they can invest in whatever they want, and will be judged solely on how much money it makes. HOW DO THEY GET PAID You've probably already heard about how many hedge funds make billions in profits. Hedge funds get paid in two ways. The first is the management fee. If you invest money with a hedge fund (or anyone for that matter), the first thing they do is take a percentage of your money from you and keep it for themselves. Hedge funds typically charge 2% of assets under management each year. They use this money to pay employees, rent office space, and cover overhead until their real payday arrives at the end of the year. The other means of payment is the performance fee. At the end of the year, the fund tallies how much money it made for investors, and takes a chunk of it for themselves. 20% is typical, but amounts have varied. So if the fund makes $5 billion for its investors, it is a $1 billion payday for

the people who run the fund. If you have a lot of money under management, and earn high rates of return, you an become fantastically wealthy very quickly. Source : http://www.reddit.com/r/explainlikeimfive/comments/j3krm/can_someone_explain_to_me_what_ a_hedge_fund_is_li5/c28v8bi