Market Neutral Fund

AAA

DEFINITION of 'Market Neutral Fund'

An aggressive type of mutual fund that aims to deliver superior returns by balancing bullish stock picks with bearish ones. They can also generate income from the interest proceeds of the sales of short securities. The objective of these funds is to generate consistent returns that are at least three to six percent above the T-bill rate. These funds can also offer returns similar to leveraged ETFs which aim to deliver 200-300% returns on any given investment.

INVESTOPEDIA EXPLAINS 'Market Neutral Fund'

Market neutral funds are fairly complex products. They are also probably not appropriate for novice or conservative investors. These funds endeavor to offer a type of investing strategy that has been found chiefly in hedge funds and separately managed accounts. Market neutral funds tend to have fairly high fees as well as turnover, and investors should consider both these issues before investing.

RELATED TERMS
  1. 130/30 Mutual Fund

    A mutual fund that has long positions and short positions in ...
  2. Equity Market Neutral

    A hedge fund strategy that seeks to exploit differences in stock ...
  3. Leveraged ETF

    An exchange-traded fund (ETF) that uses financial derivatives ...
  4. Global Fund

    A type of mutual fund, closed-end fund or exchange-traded fund ...
  5. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  6. Market

    1. A medium that allows buyers and sellers of a specific good ...
RELATED FAQS
  1. How do you calculate the excess return of an ETF or indexed mutual fund?

    For exchange-traded funds (ETFs), the excess return should be equal to the risk-adjusted (or beta) measure that exceeds the ... Read Full Answer >>
  2. Does an ETF pay out the full dividend that comes with the stocks held in that ETF?

    Exchange-traded funds (ETFs) pay out the full dividend that comes with the stocks held within the funds. To do this, most ... Read Full Answer >>
  3. How big is the derivatives market?

    The derivatives market is, in a word, gigantic, often estimated at more that $1.2 quadrillion. Some market analysts estimate ... Read Full Answer >>
  4. What kinds of derivatives are traded on an exchange?

    There are many different types of derivatives traded on exchanges including options, futures, swaps and forward contracts. ... Read Full Answer >>
  5. Who regulates the various types of exchange traded funds (ETFs)?

    The Securities and Exchange Commission (SEC), under the Securities Act of 1933, regulates the vast majority of exchange-traded ... Read Full Answer >>
  6. What does the notional principal of a derivative contract refer to?

    The notional principal amount of a derivative refers to the nominal, or predetermined, value used to calculate payments made ... Read Full Answer >>
Related Articles
  1. Insurance

    Consider Prime Rate Funds For More Income

    These funds may give you the reliable stream of income you need when you're retired.
  2. Options & Futures

    Do Money-Market Funds Pay?

    This investment provides security, but its returns may not be adequate for long-term investors.
  3. Professionals

    Alternatives Need More Education, Not Enforcement

    While disclosures and investor education need improvement, alternatives provide a valuable way to increase yield and hedge against declines.
  4. Mutual Funds & ETFs

    Top 4 ETFs That Will Help Diversify Your Portfolio

    Seeking low cost diversification to high quality stocks and bonds? Consider these 4 ETFs.
  5. Mutual Funds & ETFs

    Mutual Funds or ETFs: Which is Better?

    Trying to decide between a mutual fund or ETF? Here's what you need to know.
  6. Chart Advisor

    Long-Term Charts Suggest The Next Move Is Downward

    It is often a strategic move to remove oneself from the daily fluctuations and to broaden the time horizon to get a better idea of the long-term trend.
  7. Investing Basics

    Understanding Open-End Funds

    An open-end fund is a type of mutual fund that does not limit the amount of shares it issues, but issues as many shares as investors are willing to buy.
  8. Mutual Funds & ETFs

    Top 7 ETFs Designed for Retirement Income

    These seven ETFs offer several advantages over traditional ETFs, especially for investors seeking retirement income.
  9. Mutual Funds & ETFs

    Why You May Want To Be (And Stay) In Bonds

    Bonds are complicated, and it’s easy to feel intimidated or confused. Fortunately, you don’t need to be a numbers geek to be an informed investor.
  10. Chart Advisor

    Commodity Traders are Watching These 3 Charts

    As we head towards the summer months, many commodity traders are looking to diversify their holdings and to protect themselves against inflation.

You May Also Like

Hot Definitions
  1. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  2. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  3. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  4. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  5. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  6. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
Trading Center