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Hedge Funds - Types Of Hedge Funds

Most hedge funds are entrepreneurial organizations that employ proprietary or well-guarded strategies. While the hedge fund universe is wide and often funds can fit into multiple categories, funds are generally classified as either equity-focused or fixed-income. Past this very basic definition, funds can be broken down into any number of sub-categories, depending on their investment strategies. Some common fund types include:

  1. Long-Short Funds: Take both long and short positions in securities in hopes of using superior stock picking strategies to outperform the general market.
  2. Market-Neutral Funds: A sub-type of a long-short fund, however fund managers attempt to hedge against general market movements (thus the name "market neutral").
  3. Event-Driven Funds: An attempt to capture gains from market events, such as mergers, natural disasters or political turmoil.
  4. Macro Funds: Take directional bets on the market as a whole, either long or short, based upon research and/or the fund's philosophy.

A close look at some hedge fund strategies provides additional insight into these complex investments.

Arbitrage Strategies


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