840:
830:
820:
22:
850:
527:
212:. With this position, any event that causes all auto industry stocks to fall will cause a profit on the DaimlerChrysler position and a matching loss on the Ford position. Similarly, events that cause both stocks to rise—for example a rise in the market as a whole—will have little or no effect on the position.
255:
To make money, the hedge fund must successfully predict which stocks will perform better. It requires making intelligent use of the available information, but this is not enough—it also requires making better use of the available information than large numbers of capable investors. This strategy is
227:
strategies can be seen as the limiting case of equity long/short, in which the long and short portfolios of the fund are balanced with great care so that a very high degree of hedging is achieved. Some advantages of market neutral strategies include being able to generate positive returns in a down
164:
Long/short covers a wide variety of strategies. There are generalists, and managers who focus on certain industries and sectors or certain regions. Managers may specialize in a category — for example, large cap or small cap, value or growth. There are many trading styles, with frequent or dynamic
251:
There are many difficulties with managing long/short funds. These include the difficulties of estimating and hedging the risks to which a portfolio is exposed, and the requirement to manage unsuccessful short positions in an active manner. Short positions that are losing money grow to become an
238:
An extension on the market neutral strategy is the factor neutral strategy. The factor neutral strategy is neutral on market risk, as well as major factors like momentum and large cap vs small cap. This is a step towards more modern capital market models like the
179:
There is wide variation in the degree to which managers prioritize seeking high returns, which may involve concentrated and leveraged portfolios, and seeking low volatility, which involves more diversification and hedging.
215:
Presumably the hedge fund has sold
DaimlerChrysler and bought Ford because the manager expects Ford to perform better. If the manager is correct, the fund should profit irrespective of market and sector moves.
192:
strategy, as it adds a permanent stock index futures overlay, which makes profit or losses, depending on the movement of the market. Your portfolio then has a full equity market exposure.
235:, which can be managed through the use of derivatives, such as futures on market indexes. Market neutral funds usually seek to hedge against most or all predictable risk exposures.
157:
of the individual companies, in which investments are made. There may also be "top down" analysis of the risks and opportunities offered by industries, sectors, countries, and the
176:. In addition to being required of the portfolio as a whole, neutrality may in addition be required for individual regions, industries, sectors, and market capitalization bands.
823:
172:
by either diversifying or hedging positions across individual regions, industries, sectors and market capitalization bands and hedging against un-diversifiable risk such as
314:
800:
704:
404:
346:
319:
240:
39:
133:
that are expected to increase in value and selling short equities that are expected to decrease in value. This is different from the
105:
86:
58:
43:
65:
843:
678:
666:
72:
874:
377:
32:
805:
749:
468:
339:
54:
642:
512:
652:
647:
611:
472:
754:
551:
424:
400:
779:
437:
409:
390:
833:
684:
596:
432:
414:
332:
169:
154:
853:
739:
566:
541:
122:
764:
709:
621:
295:
209:
79:
463:
447:
385:
656:
591:
287:
795:
699:
689:
670:
637:
561:
556:
492:
477:
205:
694:
674:
442:
395:
224:
189:
158:
252:
increasingly large part of the portfolio, and their price can increase without limit.
204:
one automobile industry stock, while buying another—for example, short $ 1 million of
868:
769:
744:
734:
660:
508:
299:
201:
134:
774:
729:
616:
601:
482:
276:
264:
Singh, Laurie Kaplan (2001), "Keeping It Clean", Institutional
Investor Magazine
606:
546:
526:
232:
173:
138:
21:
355:
142:
126:
759:
372:
291:
130:
256:
primarily implemented by hedge funds and sophisticated institutions.
228:
market, and generating returns with a lower volatility profile.
328:
153:
Typically, equity long/short investing is based on "bottom up"
324:
15:
275:
Jacobs, Bruce I.; Levy, Kenneth N.; Starer, David (1999),
277:"Long-Short Portfolio Management. An Integrated Approach"
137:
strategies where investors will simultaneously buy a
788:
722:
630:
584:
575:
534:
501:
456:
423:
371:
362:
46:. Unsourced material may be challenged and removed.
315:Equity Long-Short – Hedge Fund Strategy Explained
320:Pimco Long-Short – Hedge Fund Strategy Explained
340:
8:
168:A fund manager typically attempts to reduce
824:Alternative investment management companies
801:Standards Board for Alternative Investments
849:
705:Taxation of private equity and hedge funds
581:
368:
347:
333:
325:
231:"Market neutrality" refers to hedging out
106:Learn how and when to remove this message
165:traders and some longer-term investors.
267:
405:fixed-income relative-value investing
7:
44:adding citations to reliable sources
284:The Journal of Portfolio Management
145:to simulate being long in a stock.
14:
848:
839:
838:
829:
828:
819:
818:
525:
20:
31:needs additional citations for
241:Fama–French three-factor model
1:
679:security characteristic line
667:Capital asset pricing model
386:Capital structure arbitrage
891:
469:Commodity trading advisors
125:generally associated with
814:
806:Managed Funds Association
750:High-net-worth individual
523:
220:Market neutral strategies
643:Arbitrage pricing theory
755:Institutional investors
648:Assets under management
473:managed futures account
292:10.3905/jpm.1999.319730
188:This is in addition to
780:Sovereign wealth funds
552:High-frequency trading
401:Fixed income arbitrage
286:(Winter 1999): 23–26,
208:, long $ 1 million of
622:Structured securities
438:Distressed securities
410:Statistical arbitrage
396:Equity market neutral
391:Convertible arbitrage
129:. It involves buying
740:Financial endowments
685:Fundamental analysis
433:Shareholder activism
415:Volatility arbitrage
155:fundamental analysis
40:improve this article
854:List of hedge funds
844:Hedge fund managers
760:Insurance companies
745:Fund of hedge funds
653:Black–Scholes model
567:Proprietary trading
542:Algorithmic trading
509:Fund of hedge funds
200:A hedge fund might
123:investment strategy
55:"Long/short equity"
710:Technical analysis
184:Equitized strategy
875:Financial markets
862:
861:
718:
717:
521:
520:
488:Long/short equity
464:Convergence trade
448:Special situation
119:Long/short equity
116:
115:
108:
90:
882:
852:
851:
842:
841:
832:
831:
822:
821:
765:Investment banks
612:Foreign exchange
582:
529:
369:
349:
342:
335:
326:
303:
302:
281:
272:
111:
104:
100:
97:
91:
89:
48:
24:
16:
890:
889:
885:
884:
883:
881:
880:
879:
865:
864:
863:
858:
810:
796:Fund governance
784:
714:
638:Absolute return
626:
577:
571:
562:Program trading
557:Prime brokerage
530:
517:
497:
493:Trend following
478:Dedicated short
452:
419:
376:
364:
358:
353:
311:
306:
279:
274:
273:
269:
262:
249:
222:
206:DaimlerChrysler
198:
196:Hedging example
186:
151:
112:
101:
95:
92:
49:
47:
37:
25:
12:
11:
5:
888:
886:
878:
877:
867:
866:
860:
859:
857:
856:
846:
836:
826:
815:
812:
811:
809:
808:
803:
798:
792:
790:
786:
785:
783:
782:
777:
772:
770:Merchant banks
767:
762:
757:
752:
747:
742:
737:
735:Family offices
732:
726:
724:
720:
719:
716:
715:
713:
712:
707:
702:
697:
695:Securitization
692:
687:
682:
664:
650:
645:
640:
634:
632:
628:
627:
625:
624:
619:
614:
609:
604:
599:
594:
588:
586:
579:
573:
572:
570:
569:
564:
559:
554:
549:
544:
538:
536:
532:
531:
524:
522:
519:
518:
516:
515:
505:
503:
499:
498:
496:
495:
490:
485:
480:
475:
466:
460:
458:
454:
453:
451:
450:
445:
443:Risk arbitrage
440:
435:
429:
427:
421:
420:
418:
417:
412:
407:
398:
393:
388:
382:
380:
378:relative value
366:
360:
359:
354:
352:
351:
344:
337:
329:
323:
322:
317:
310:
309:External links
307:
305:
304:
266:
261:
258:
248:
245:
225:Market neutral
221:
218:
197:
194:
190:market neutral
185:
182:
150:
147:
114:
113:
28:
26:
19:
13:
10:
9:
6:
4:
3:
2:
887:
876:
873:
872:
870:
855:
847:
845:
837:
835:
827:
825:
817:
816:
813:
807:
804:
802:
799:
797:
794:
793:
791:
787:
781:
778:
776:
775:Pension funds
773:
771:
768:
766:
763:
761:
758:
756:
753:
751:
748:
746:
743:
741:
738:
736:
733:
731:
730:Vulture funds
728:
727:
725:
721:
711:
708:
706:
703:
701:
698:
696:
693:
691:
688:
686:
683:
680:
676:
672:
668:
665:
662:
661:delta neutral
658:
654:
651:
649:
646:
644:
641:
639:
636:
635:
633:
629:
623:
620:
618:
617:Money markets
615:
613:
610:
608:
605:
603:
600:
598:
595:
593:
590:
589:
587:
583:
580:
574:
568:
565:
563:
560:
558:
555:
553:
550:
548:
545:
543:
540:
539:
537:
533:
528:
514:
513:Multi-manager
510:
507:
506:
504:
500:
494:
491:
489:
486:
484:
481:
479:
476:
474:
470:
467:
465:
462:
461:
459:
455:
449:
446:
444:
441:
439:
436:
434:
431:
430:
428:
426:
422:
416:
413:
411:
408:
406:
402:
399:
397:
394:
392:
389:
387:
384:
383:
381:
379:
374:
370:
367:
361:
357:
350:
345:
343:
338:
336:
331:
330:
327:
321:
318:
316:
313:
312:
308:
301:
297:
293:
289:
285:
278:
271:
268:
265:
259:
257:
253:
246:
244:
242:
236:
234:
229:
226:
219:
217:
213:
211:
207:
203:
195:
193:
191:
183:
181:
177:
175:
171:
166:
162:
160:
159:macroeconomic
156:
148:
146:
144:
140:
136:
135:risk reversal
132:
128:
124:
120:
110:
107:
99:
96:February 2021
88:
85:
81:
78:
74:
71:
67:
64:
60:
57: –
56:
52:
51:Find sources:
45:
41:
35:
34:
29:This article
27:
23:
18:
17:
607:Fixed income
487:
483:Global macro
425:Event-driven
283:
270:
263:
254:
250:
237:
230:
223:
214:
199:
187:
178:
167:
163:
152:
118:
117:
102:
93:
83:
76:
69:
62:
50:
38:Please help
33:verification
30:
834:Hedge funds
597:Derivatives
592:Commodities
547:Day trading
457:Directional
356:Hedge funds
233:market risk
174:market risk
161:situation.
141:and sell a
139:call option
127:hedge funds
789:Governance
363:Investment
260:References
202:sell short
170:volatility
143:put option
66:newspapers
723:Investors
373:Arbitrage
300:154010531
869:Category
365:strategy
247:Problems
149:Overview
131:equities
585:Markets
576:Related
535:Trading
80:scholar
657:Greeks
602:Equity
298:
121:is an
82:
75:
68:
61:
53:
700:Short
690:Hedge
671:alpha
578:terms
502:Other
296:S2CID
280:(PDF)
87:JSTOR
73:books
675:beta
631:Misc
210:Ford
59:news
288:doi
243:.
42:by
871::
677:/
673:/
659::
511:/
471:/
403:/
294:,
282:,
681:)
669:(
663:)
655:(
375:/
348:e
341:t
334:v
290::
109:)
103:(
98:)
94:(
84:·
77:·
70:·
63:·
36:.
Text is available under the Creative Commons Attribution-ShareAlike License. Additional terms may apply.
