From the category archives:

Hedge Fund Careers

Hedge Fund Strategies: Arbitrage

March 23, 2009

Arbitrage is an exotic-sounding name for a group of strategies that try profit from price differences between securities or markets. For example, suppose a hedge fund trader noticed that a stock is trading at $11.98 in New York and $11.99 in London. He would buy as many shares as possible in New York, using leverage […]

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Hedge Fund Strategies: Emerging Markets

March 19, 2009

Last time we noted that some hedge funds are defined by the geographic markets in which they invest, rather than the specific strategies they follow. We looked at regional funds, country-specific, and emerging markets hedge funds. An emerging markets hedge fund manager invests in the equity or debt of less mature markets, which have the […]

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Hedge Fund Strategies: Geographic Orientations

March 16, 2009

Hedge fund managers use a wide variety of trading strategies with differing levels of risk and return. Overall, their primary goal is to generate positive returns regardless of market conditions. There are dozens of hedge fund strategies and sub-strategies within those categories. Complicating matters is that there is no standardized system of classifying hedge funds […]

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Short-Selling: A Highly Volatile Trading Strategy

March 12, 2009

Last time we looked at what short-selling is, and how hedge fund managers use prime brokers to borrow securities to sell short. Jaeger, in his book, All About Hedge Funds: The East Way to Get Started, points out just how volatile short-selling can be. Suppose you open an account at a prime broker with $100,000 […]

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Hedge Fund Strategies: Short Selling

March 9, 2009

Short-selling by hedge funds attracted a lot of press attention in 2008, especially when the Securities and Exchange Commission, acting in concert with the U.K. Financial Services Authority, temporarily issued a ban to prohibit short selling in financial companies. Regulators wanted to “protect the integrity and quality of the securities market and strengthen investor confidence” […]

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Market-Neutral Hedge Fund Investing

March 5, 2009

Last time, we examined how market-neutral hedge funds “hedge” market risk with offsetting long and short positions. We looked at market-neutral equity investing in particular. Investment professionals who hold jobs as market-neutral managers use other securities to hedge against market risk as well. Bond hedgers try to remove the effect of broad market moves from […]

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Hedge Fund Strategies — Market Neutral

March 3, 2009

Market-neutral hedge funds are close to the true definition of a hedge fund, in that they “hedge” market risk with offsetting long and short positions. A market-neutral hedge fund manager, for example, will take long positions in a company’s stock that he thinks is undervalued, and take short positions in stocks that he thinks are overvalued. The […]

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