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

Related Articles
  1. Investing

    Evaluating Hedge Fund Performance

    Most investors are aware of hedge funds, but many don't know the dirty details of this unique investment type.
  2. Financial Advisor

    4 Reasons to Still Consider Traditional 2 & 20 Hedge Funds

    Find out why traditional 2 & 20 hedge funds are still worth considering as an investment, even though they have underperformed for the last several years.
  3. Investing

    Hedge Funds: Higher Returns Or Just High Fees?

    Discover the advantages and pitfalls of hedge funds and the questions to ask when choosing one.
  4. Investing

    What Are Hedge Funds?

    Hedge funds may be similar to mutual funds in some ways, but they differ in other ways like fee structure. Is a hedge fund for you?
  5. Investing

    Hedge Funds Hunt For Upside, Regardless Of The Market

    Hedge funds seek positive absolute returns, and engage in aggressive strategies to make this happen.
  6. Investing

    Hedge Funds' Higher Returns Come At A Price

    Learn how hedge funds win big gains for investors - and why they sometimes lose.
  7. Investing

    3 Things Divorcees With Hedge Fund Investments Should Know

    Hedge funds are assets that can be very difficult to divide during a divorce.
  8. Investing

    Taking A Look Behind Hedge Funds

    Hedge funds can draw returns well above the market average even in a weak economy. Learn about the risks.
  9. Investing

    Hedge Fund Balance Sheet Example

    What once was a niche investment vehicle for the ultra-rich, the hedge fund industry has grown to more than $2.5 billion in assets under management.
  10. Managing Wealth

    Will Hedge Funds Be Around in 10 Years?

    Learn why some analysts see hedge funds as a dying breed, especially after a torturous January 2016 for fund managers around the world.
Frequently Asked Questions
  1. When are Beneficiaries of a Will Notified?

    Learn when the beneficiaries of a will must be notified, and understand how this requirement varies depending on whether ...
  2. Why Does Larry Page Pay Himself a $1 Salary?

    Google co-founder Larry Page continues to take an annual salary of only $1 as chief executive officer.
  3. What is Common Stock and Preferred Stock?

    Learn about the differences between common and preferred shares. Explore situations where preferred shares have more favorable ...
  4. Can CareCredit be Used for Family Members?

    Learn more about the available options that CareCredit offers to pay for out-of-pocket medical procedures with little to ...
Trading Center