What are some hedge fund strategies?
- Rajesh Desai
- Nov 24, 2021
- 2 min read
If you are looking to find out about the different strategies that hedge funds use, I’ve got the perfect answer for you. The performance of hedge funds depends a lot on the investment strategy they use to generate profits. They are even classified based on the strategy they use.
To answer your question, in brief, there are mainly 4 types of hedge fund strategies that are commonly seen today -
The bull and bear strategy - The hedge funds that use this strategy usually believe in being the bulls or bears of a trade. This means they would buy a position in the financial market if they see a particular asset having the potential to rise and similarly, open a sell position if they find an asset that is dropping in value. This is also applicable in the derivatives market with the help of a call or puts option; these are essentially contracts that give their holders the right, not a compulsion, to sell the underlying asset at a pre-defined price.
The unmoved by the market strategy - Hedge funds, as said in their name, hedge their position in the market. This technically means to open a buy and a sell position simultaneously in an effort to achieve a neutral market exposure. However, do keep in mind that this involves a deep understanding of the financial markets to generate profit out of such an impartial investment strategy.
The unmoved by the market strategy - Hedge funds, as said in their name, hedge their position in the market. This technically means to open a buy and a sell position simultaneously in an effort to achieve a neutral market exposure. However, do keep in mind that this involves a deep understanding of the financial markets to generate profit out of such an impartial investment strategy.
The macro strategy - These hedge funds only focus on the macro-economic events and make their investment decisions based highly on the news that causes significant market movements.
I hope you found this answer useful and are now aware of the different strategies that hedge funds generally use to generate such high returns.
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