Market Neutral Fund

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.

BREAKING DOWN '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. Market

    A medium allowing buyers and sellers of a specific good or service ...
  2. 130/30 Mutual Fund

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

    A hedge fund strategy that seeks to exploit differences in stock ...
  4. Global Fund

    A type of mutual fund, closed-end fund or exchange-traded fund ...
  5. Leveraged ETF

    An exchange-traded fund (ETF) that uses financial derivatives ...
  6. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
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. Investing Basics

    Bill Ackman's 2 Best Investments (GGP, CP)

    Learn about the two best investments Ackman ever made. Ackman has demonstrated a consistent track record of success in all types of market environments.
  4. Investing

    George Soros: 3 Best Investments Ever

    Learn about some of the most successful trades famed investor George Soros has made during his career, including a billion dollar profit against the pound.
  5. Chart Advisor

    How Are You Trading The Breakdown In Growth Stocks? (VOOG, IWF)

    Based on the charts of these two ETFs, bearish traders will start turning their attention to growth stocks.
  6. Saving and Spending

    Where Does Bill Ackman Keep His Money?

    Learn about where prominent hedge fund manager Bill Ackman keeps his money. See how his short position in Herbalife has not been successful so far.
  7. Mutual Funds & ETFs

    Pimco’s Top Funds for Retirement Income

    Once you're living off the money you've saved for retirement, is it invested in the right assets? Here are some from PIMCO that may be good options.
  8. Stock Analysis

    Elliott Management: An Activist Investor Analysis (HES, CTXS)

    Learn about the activist investor strategies used by Elliott Management. Read about the fund's positions in Hess Corp., Citrix and CDK Global.
  9. Mutual Funds & ETFs

    3 AllianceBernstein Funds that Are Rated 5 Stars by Morningstar

    Discover the top three mutual funds administered and managed by AllianceBernstein that have received five-star overall ratings from Morningstar.
  10. Mutual Funds & ETFs

    Top 4 Davis Funds for Retirement Diversification in 2016

    Discover the four best mutual funds managed by Davis Advisors that pursue different investment strategies that can help diversify retirement portfolios.
RELATED FAQS
  1. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  2. What is securitization?

    Securitization is the process of taking an illiquid asset, or group of assets, and through financial engineering, transforming ... Read Full Answer >>
  3. Are target-date retirement funds good investments?

    The main benefit of target-date retirement funds is convenience. If you really don't want to bother with your retirement ... Read Full Answer >>
  4. Do mutual funds require a demat account?

    A dematerialized account enables electronic transfer of funds. The account is used so an investor does not need to hold the ... Read Full Answer >>
  5. Can hedge funds trade penny stocks?

    Hedge funds can trade penny stocks. In fact, hedge funds can trade in just about any type of security, including medium- ... Read Full Answer >>
  6. How liquid are Vanguard mutual funds?

    The Vanguard mutual fund family is one of the largest and most well-recognized fund family in the financial industry. Its ... Read Full Answer >>
Hot Definitions
  1. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  2. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  3. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  4. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  5. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
Trading Center