1. Style Types
    1. Tactical Trading - speculates on the direction of currency, commodity, fixed income and equity.
      1. Global Macro - here, managers make leveraged opportunistic investment in equity, fixed income, commodity and foreign currency markets. The underpinning for their decisions is a macroeconomic (whence the term 'macro') or top-down view of the interplay of political, economic and market factors. Portfolios tend to be concentrated and large, making extensive use of derivatives to hedge and speculate. Such funds are distinguished by a high degree of discretion making the manager's skill of paramount importance.
      2. Managed Futures/CTA - managers trade listed commodity and managed futures for their clients. Subsumed under this discipline are two subclassifications: systematic trading and discretionary trading. In the former, traders rely heavily upon the quantitative analysis of historical price movements to anticipate future price activity, whereas in the latter approach emphasized a marriage of technical and fundamental analysis along with the trader's own experience.
    2. Equity Long/Short - managers invest in long and short positions in equity securities in unequal measure, in an effort to reduce, but not eliminate market exposure. Complete market neutrality is rarely achieved. While most are net long, leaving them highly susceptible to systematic risk, some assume an aggressive short position. The sub-strategies are enumerated below.
      1. Regional/Industry focus - specialization is in a particular geographic area, be it global (Asia, Europe), or local (United States) or in a specific industry (pharmaceuticals, transports).
      2. Short Only - managers assume short positions only. In a bull market, the risk of loss is unlimited, whereas in bear markets, such a strategy fares better.
      3. Emerging - here the manager invests in all manner of securities in emerging markets. Risks are acute in this approach due to a lack of transparency in accounting standards, the prevalence of economic and political turmoil and less than savvy management. Shunned by many investors in consequence, these markets present unique opportunities for those with the long-term fortitude and patience to ferret out lucrative investments amidst a great deal of uncertainty. Compounding the challenge is often the inability to hedge risk by short selling or use of derivatives, both precluded by regulation in many markets. Most of these strategies have a long bias.
      4. Market Timing - investors opportunistically adjust their long and short exposure in response to changing market factors.
    3. Event-Driven - these types of strategies attempt to take advantage of pricing discrepancies in debt and equity securities brought about by corporate actions and events such as mergers and acquisitions, spin-offs, bankruptcy, share repurchases, recapitalizations and reorganizations. The aforementioned events drive the perceived opportunities of which savvy and well informed managers seek to take advantage.
      1. Distressed Securities - the prices of debt and equity securities of companies in financial difficulty are often marked down considerably as a result. Managers may purchase such investments if they perceive the existence of an event that could release value. Credit and liquidity risk are prevalent.
      2. Risk Arbitrage (merger arbitrage) - this approach entails the assumption of positions in a situation such as a merger, buyout or takeover. A typical strategy is to buy the shares of the company to be acquired and sell short those of the acquirer. Possible deal breakage could see investors on the wrong side of the trade.
      3. Event-Driven Multi-Strategy - is just that, a strategy of strategies, namely the aforementioned. This approach brings these together to hedge and speculate as the opportunity arises. Also considered are less liquid shares such as small and micro-capitalization stocks as well as those which are privately held.
Hedge Fund Style and Structure Types

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