1. Convertible Arbitrage
Long the convertible bond and short the common stock of the same company. Protecting principal from market moves.
2. Dedicated Short Bias
Short positions in mostly equities and derivatives. The short bias greater than zero.
3. Emerging Markets (Avantium)
Equity or fixed income investing in emerging markets. do not allow short selling, futures or other derivatives with which to hedge -> often long-only strategy.
Long the convertible bond and short the common stock of the same company. Protecting principal from market moves.
2. Dedicated Short Bias
Short positions in mostly equities and derivatives. The short bias greater than zero.
3. Emerging Markets (Avantium)
Equity or fixed income investing in emerging markets. do not allow short selling, futures or other derivatives with which to hedge -> often long-only strategy.
4. Equity Market Neutral (Long 1 Coke Short 1.5 Pepsi)
Simultaneously long and short matched equity portfolios of the same size within a country. Designed to be either beta or currency neutral, or both. Well-designed portfolios typically control for industry, sector, market capitalization, and other exposures. Leverage is often applied to enhance returns.
5. Event Driven
Merger, corporate restructuring, liquidation, bankruptcy or reorganization.
5.1. Risk Arbitrage
Long the stock of the company being acquired and short the stock of the acquiring company. The principal risk is deal risk, should the deal fail to close.
5.2. Distressed Hedge Fund
Invest in the debt, equity or trade claims of companies in financial distress and general bankruptcy. typically trade at substantial discounts to par value. purchasing a senior debt tier and short-selling common stock, in the hopes of realizing returns from shifts in the spread between the two tiers.
5.3. Multi-Strategy:
Risk arbitrage, distressed securities, and occasionally others such as investments in micro and small capitalization public companies that are raising money in private capital markets.
6. Fixed Income Arbitrage (LTCM, eg. Long 29.5 years US bond, Short 30 years)
Steady returns with low volatility. Interest rate swap arbitrage, US and non-US government bond arbitrage, forward yield curve arbitrage, and mortgage-backed securities arbitrage. The mortgage-backed market is primarily US-based, over-the-counter and particularly complex.
7. Global Macro
Long and short positions in any of the world’s major capital or derivative markets. Influenced by major economic trends and or events. Stocks, bonds, currencies, and commodities in the form of cash or derivatives instruments.
8. Long/Short Equity
Directional strategy involves equity-oriented investing on both the long and short sides of the market. Shift from value to growth, from small to medium to large capitalization stocks, and from a net long position to a net short position. May use futures and options to hedge. The focus may be regional, such as long/short US or European equity, or sector specific, such as long and short technology or healthcare stocks.
9. Managed Futures (IMC)
Financial and commodity futures, currency markets around the world. The managers are usually referred to as Commodity Trading Advisors, or CTAs. Trading disciplines are generally systematic or discretionary. Systematic traders tend to use price and market specific information (often technical) to make trading decisions, while discretionary managers use a judgmental approach.
10. Multi-Strategy
Use of many strategies, and the ability to reallocate capital between strategies in response to market opportunities, means that such Hedge Funds are not easily assigned to any traditional category. The includes Hedge Funds employing unique strategies
11. Fund of Funds (EIM)
Invest on other hedge funds
To sum up, there are two main categories. First is Statistical Arbitrage (market neutral), including Convertible arbitrage, equity market neutral, fixed-income arbitrage, and risk arbitrage. Second is Directional, including: emerging market, short bias, distressed, global macro, long/short equity, and managed futures.
What I like the most out of these: statistical arbitrage. Since it's related to the beauty of Time Series I mentioned in the previous post. Cointegration, principle component analysis, factor models, yummy all sound delicious.
Meanwhile someone doesn't like other people being cheesy.
Directional strategy involves equity-oriented investing on both the long and short sides of the market. Shift from value to growth, from small to medium to large capitalization stocks, and from a net long position to a net short position. May use futures and options to hedge. The focus may be regional, such as long/short US or European equity, or sector specific, such as long and short technology or healthcare stocks.
9. Managed Futures (IMC)
Financial and commodity futures, currency markets around the world. The managers are usually referred to as Commodity Trading Advisors, or CTAs. Trading disciplines are generally systematic or discretionary. Systematic traders tend to use price and market specific information (often technical) to make trading decisions, while discretionary managers use a judgmental approach.
10. Multi-Strategy
Use of many strategies, and the ability to reallocate capital between strategies in response to market opportunities, means that such Hedge Funds are not easily assigned to any traditional category. The includes Hedge Funds employing unique strategies
11. Fund of Funds (EIM)
Invest on other hedge funds
To sum up, there are two main categories. First is Statistical Arbitrage (market neutral), including Convertible arbitrage, equity market neutral, fixed-income arbitrage, and risk arbitrage. Second is Directional, including: emerging market, short bias, distressed, global macro, long/short equity, and managed futures.
What I like the most out of these: statistical arbitrage. Since it's related to the beauty of Time Series I mentioned in the previous post. Cointegration, principle component analysis, factor models, yummy all sound delicious.
Meanwhile someone doesn't like other people being cheesy.
No comments:
Post a Comment