Hedge Funds & Strategy

Filed in archive Hedgetalk on April 26, 2007

Here are a couple of the most common strategies that hedge fund managers use;

Emerging markets : Investing in securities of companies in the ever emerging economies through the purchase of sovereign or corporate debt and /or shares.

Fund of funds : Investing in a "basket" of hedge funds. Some funds of funds focus on single strategies and other pursue multiple strategies, these funds have an added layer of fees.

Convertible arbritrage : This involves going long in the convertible securities (usually shares or bonds) that are exchangeable for a certain number of another form (common shares) at a preset price and simultaneously shorting the underlying equities. This strategy previously was very effective and was a standard. However this type of action seems to have lost effectiveness and seems to have lost favor in the crowd.

global macro - Investing in shifts between global economies , often using derivatives to speculate on interest-rate or currency moves.

Market neutral : Typically , equal amounts of capital are invested long and short in the market, attempting to neutralize risk by purchasing undervalued securities and taking short positions in overvalued securities.