Hedge Funds Flashcards
What is a “Fundamental Long/Short” Strategy?
In this strategy, the hedge fund takes a long position in companies that are trading at inexpensive levels compared to their potential intrinsic value and shorts those that trade in the other direction, with the intention of reversing this trade to obtain alpha.
What is a “fundamental growth” strategy ?
These strategies use fundamental analysis to identify companies that exhibit high growth and capital appreciation.
What is “Fundamental Value” ?
These strategies use fundamental analysis to identify undervalued and unloved companies for which there is a possibility that a corporate turnaround, with future revenue and cash flow growth, will result in higher valuations.
What is a “Short-Biased” Strategy?
These strategies use quantitative, technical, and fundamental analysis to short overvalued equity securities with limited or no long-side exposures.
What is a “Market Neutral” Strategy?
These strategies use quantitative, fundamental, and technical analysis to identify under- and - overvalued equity securities.
The hedge fund usually takes a long position in undervalued securities and short positions in overvalued securities, while seeking to maintain a market-neutral net position.
What is “Merger Arbitrage”?
Generally, these strategies involve going long (buying) the stock of the company being acquired at a discount to its announced takeover price and going short (selling) the stock of the acquiring company when the merger or acquisition is announced.
What is a “Distressed/Restructuring” strategy?
These strategies focus on securities of companies either in or perceived to be near bankruptcy.
In one approach, hedge funds simply purchase fixed-income securities trading at a significant discount to part but that are still senior enough to be back by sufficient corporate assets.
What are “Special Situations” strategies?
These strategies focus on opportunities to buy the equity of companies engaged in security issuance or repurchase, special capital distributions, rescue finance, asset sales / spin-offs, or other catalyst-oriented situations.
What is an “Activist” Strategy?
A strategy where a manager secures equity holdings to allow them to seek a position in a company’s board and influence corporate policies or direction.
