What are the most common hedge fund strategies?

List of Most Common Hedge Fund Strategies

• # 1 Long/Short Equity Strategy.
• # 2 Market Neutral Strategy.
• # 3 Merger Arbitrage Strategy.
• # 4 Convertible Arbitrage Strategy.
• # 5 Capital Structure Arbitrage Strategy.
• # 6 Fixed-Income Arbitrage Strategy.
• # 7 Event-Driven Strategy.
• # 8 Global Macro Strategy.

What are hedge fund strategies explain with example?

In long/short hedge fund strategies, managers make what are known as “pair trades” to bet on two securities in the same industry. For example, if they expect Coke to perform better than Pepsi, they would go long Coke and short Pepsi.

What is an example of a high risk investment?

Penny stocks are considered high risk investment due to lack of liquidity and risk of large fluctuations in value owing to purchase or sell by larger investors. High Yield Bonds: This type of bonds usually offer outrageous returns in exchange for the potential risk of losing the principal itself.

What are the risk in hedge funds?

Hedge funds share several risks as other investment classes are broadly classified as Liquidity Risk and Manager Risk. Liquidity refers to how quickly security can be converted into cash. Funds generally employ a lock-up period during which an investor cannot withdraw money or exit the Fund.

What are the different types of hedging strategies?

Types of hedging

• Forward exchange contract for currencies.
• Commodity future contracts for hedging physical positions.
• Currency future contracts.
• Money Market Operations for currencies.
• Forward Exchange Contract for interest.
• Money Market Operations for interest.
• Future contracts for interest.
• Covered Calls on equities.

What is the strategy of hedge fund?

Hedge fund strategies encompass a broad range of risk tolerance and investment philosophies within a wide array of investments, including debt and equity securities, commodities, currencies, derivatives, real estate, and other investment vehicles.

Which funds are high-risk?

Top high-risk mutual funds

• Escorts Tax Plan Direct-G.
• Aditya Birla SL Tax Plan Direct-G.
• DSP BlackRock Tax Saver Fund – Direct Plan.
• Aditya Birla Sun Life Tax Relief 96 – Direct Plan.
• Tata India Tax Savings Fund – Direct Plan.
• L Tax Advantage Direct-G.
• IDFC Tax Advantage (ELSS) Fund – Regular Plan.

Is a hedge fund high-risk?

High-Risk. In general, hedge funds are considered to be high-risk investments because of the huge potential for money loss. Again, these funds are primarily controlled by hedge funds managers, and with pools of money going into investments, there is likely going to be some loss.

How do hedge funds mitigate risk?

Hedging is a risk management strategy employed to offset losses in investments by taking an opposite position in a related asset. The reduction in risk provided by hedging also typically results in a reduction in potential profits. Hedging strategies typically involve derivatives, such as options and futures contracts.