Common hedge fund strategies

Post date: Apr 15, 2019 10:19:41 PM

For nearly two decades, Scott Tominaga has been in the hedge funds industry and has seen how hedge fund investment has continuously evolved into becoming one of the largest segments of the investment management industry and an integral part of Wall Street’s ecosystem.

There are now various hedge fund strategies, the most common of which are the following:

Global macro: This strategy arguably has the highest risk-return profile of any hedge fund strategy because it deals with investing sizably in shares, bonds, currency markets, commodities, and other similar derivative securities. Managers who use this strategy utilize macroeconomic analysis based on global economic and political events and trends to determine which asset classes to invest in.

Long/short equity: As the name implies, the strategy involves maintaining long and short positions in equity and equity derivative securities. This can be done by buying stocks that seem to be undervalued and selling short stocks that are deemed overvalued.

Market neutral: This strategy is similar to the previous one but has a lower risk and lower expected returns. It uses the same concept. However, exposure to the broad market is minimized by having equal market values of investment in both long and short positions to ensure that net exposure is equivalent to zero.

These are just few of the strategies employed in hedge fund investments. To determine what strategy is most suitable to utilize, it is best to consult with experts, such as Scott Tominaga.

Scott Tominaga is the COO of PartnersAdmin LLC, a company that employs a team of experts that have hands-on experience needed in solving the challenging operational issues faced by alternative funds managers. Read more discussions about the industry by subscribing to this blog.