Returns on equity-oriented strategies are generally more highly
correlated
to the equity market than other hedge fund strategies. This means that the same forces that affect what's happening to individual stocks in the market — changes in the economy, earnings reports, political instability — will affect the return that the hedge fund realizes.
Market neutral portfolios are made up of a combination of long and short positions in correlated securities calculated to hedge risk and stabilize return.
Long/short equities strategy involves taking a combination of long positions in undervalued companies and short positions in overvalued companies, with the aim of maintaining a low overall risk and achieving a positive return whichever way the market moves.
Short-sale hedge funds specialize in taking short positions in the stock of overvalued companies. These funds, and others that short, can take advantage of bear markets to produce positive investment returns, something that mutual funds can't do.
A global macro strategy is one of the most popular hedge fund strategies. A manager aims to exploit global economic events, such as shifts in worldwide interest rates and economic policies. Managers make bets on international currencies and commodities,
taking positions in futures contracts and other derivatives. Global macro portfolios generally include long/short equity positions to balance the higher risk macro strategy.
How global macro strategy made hedge funds famous (or infamous)
During the Asian and Russian currency crises in 1998, a host of hedge fund managers speculating in foreign currency and emerging markets fell on hard times. The most spectacular failure was that of Long-Term Capital Management LP (LTCM), a hedge fund so leveraged in its derivative investments that its collapse nearly precipitated a national financial crisis in the U.S. markets, as the banks and investment firms that had financed the leverage struggled to recover from the scale of LTCM's loan defaults. Only a federal government orchestrated $3.6 billion bailout eased the crisis.
A global macro strategy is one of the most popular hedge fund strategies. A manager aims to exploit global economic events, such as shifts in worldwide interest rates and economic policies. Managers make bets on international currencies and 