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

    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?
  4. Investing

    Hedge Funds Go Retail

    Find out how average investors are breaking into what was once reserved for the ultra rich.
  5. Investing

    Just How Different Are Hedge Fund Investing Strategies?

    Before investing in hedge funds, be sure to consider all the facts.
  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

    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.
  8. Investing

    The Multiple Strategies Of Hedge Funds

    Hedge fund investors or potential investors need to understand how much risk hedge funds take in making money.
  9. Managing Wealth

    HF Performance Report: Did Hedge Funds Earn Their Fee in 2015?

    Find out whether hedge funds, which have come under tremendous pressure to improve their performance, managed to earn their fee in 2015.
Frequently Asked Questions
  1. What's considered to be a good debt-to-income (DTI) ratio?

    Your debt-to-income ratio helps lenders determine your credit worthiness. Find out how to calculate your score and how to ...
  2. What is the difference between a loan and a line of credit?

    Learn to differentiate between lines of credit and standard loans, and determine when you are likely to use each method of ...
  3. What does a Chief Financial Officer (CFO) do?

    A CFO is responsible for accurate reporting of a company's financial information, investing the company's money and identifying ...
  4. How did George Soros break the Bank of England?

    George Soros pocketed $1 billion by betting against the British pound, cementing his reputation as the premier currency speculator ...
Trading Center