Different Ways

HEDGE FUND
Invests Their Money?
Hedge funds are known for their aggressive
investment strategies to make returns for its
investors.

They use leverage, and derivatives and also

take short positions in stocks.

Because of this, hedge funds employ various

strategies to minimize risk and generate active
returns for their investors.
Different Hedge Fund
Strategies:
According to Hedge Fund Research, Inc., there
are four main hedge fund strategies:

1) Event-Driven Strategies

2) Relative Value Strategies

3) Macro Strategies
4) Equity Hedge Fund
Strategies
1) Event-Driven Strategies
These strategies revolve around investing in
companies experiencing significant corporate
events.

These events can include mergers, acquisitions,

bankruptcies, or restructurings.

There are four subcategories of Event Driven

Strategies:

a) Merger Arbitrage
b) Distressed/Restructuring
c) Activist Shareholder
d) Special Situations
a) Merger Arbitrage
In this, hedge funds buy the shares of the firm
that is acquired and sell short the firm making
the acquisition.

By buying shares of the target company, hedge

funds anticipate the stock price to increase as
the merger progresses.

b) Distressed/ Restructuring

The distressed/restructuring strategy

focuses on investing in the debt or equity of
financially distressed companies.

This strategy aims to benefit from the potential

recovery and turnaround of these companies.
c) Activist Shareholder

The activist shareholder strategy involves

acquiring a significant stake in a company's shares
with the intention of actively influencing its
management and decision- making.

d) Special situations
It is a hedge fund strategy that involves
capitalizing on unique opportunities that may
lead to mispriced securities.

This strategy focuses on investment

opportunities such as spin-offs, legal
settlements, and reorganizations.
2) Relative Value Strategies
This strategy aims to capitalize on price
discrepancies between related securities.

It involves identifying assets or instruments

that are deemed to be mispriced relative to
each other.

a) Convertible Arbitrage Fixed Income

b) Asset-Based Fixed Income

c) General Fixed Income

d) Volatility
e) Multistrategy
a) Convertible Arbitrage Fixed Income

This strategy involves exploiting the pricing

discrepancies between convertible bonds and
the common stock of the same company.

b) Asset-Based Fixed Income

This strategy involves exploiting the pricing
discrepancies between various Mortgage-
backed securities(MBS) or Asset-backed Securites.

c) General Fixed Income

This strategy involves exploiting the pricing
discrepancies between fixed income securities
of various issuers and types.
d) Volatility
It is a hedge fund strategy that focuses on
profiting from changes in volatility levels or
implied volatility in financial markets.

Volatility refers to the uncertainty in an

asset's value over a certain period.

e) Multistategy
Multistrategy is an approach where hedge funds
combine multiple investment strategies within a
single fund.

The key advantage of a multistrategy

approach is the ability to adapt to changing
market conditions.
3) Macro Strategies
Macroeconomic strategies, are a type of hedge
fund strategy that focuses on making investment
decisions based on macroeconomic trends and
events.

This strategy involves analyzing and predicting

the broader economic landscape to identify
investment opportunities across various asset
classes and markets.

Macro funds consider factors such as interest

rates, inflation, GDP growth, geopolitical events,
and other economic indicators to formulate their
investment thesis.
4) Equity Hedge Fund
Strategy
Equity hedge fund strategies seek to profit from
long or short positions in publicly traded equities
and derivatives.

a) Market Neutral

b) Fundamental long/short growth

c) Fundamental Value

d) Sector Specific
e) Short Bias
a) Market Neutral

Market neutral is a hedge fund strategy that aims

to generate returns by maintaining a balanced
portfolio that is not significantly impacted by
overall market movements.

b) Fundamental long/short growth

It is a hedge fund strategy that combines long
and short positions in individual stocks based on
fundamental analysis.

The strategy aims to identify companies

with strong growth prospects companies
and going long on them, while shorting the
weaker growth companies, simultaneously.
c) Fundamental Value

This strategy focuses on investing in securities

believed to be undervalued based on their
intrinsic or fundamental characteristics.

d) Sector Specific

This strategy focuses on investing in securities

within specific sectors or industries.

e) Short Bias
This hedge fund strategy primarily focuses on
profiting from declining prices of overvalues
securities.
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Harshal Jamdhade