Hedge Funds Multi Strategy
- Multi-strategy hedge funds are the most diverse portfolios in the hedge fund universe.
- Multi-strategies combine different single hedge fund strategies in one portfolio and differentiate considerably from each other. Most often, such portfolios include a variety of long-short, relative value and event-driven strategies.
- There are many Fund-of-Hedge Funds (FoHF), which select and combine a variety of single hedge fund managers to form multi-strategy portfolios with varying risk-/return goals.
- On average, multi-strategy hedge funds offer strong diversification benefits for traditional long-only portfolios and increase the portfolio efficiency meaningfully in terms of risk-/return.
Limited drawdown risk
Emerged from relative value strategies
The equity long-short strategy is the most popular hedge fund strategy attracting the most capital among the hedge fund universe. A successful long-short strategy helps to increase the efficiency of a traditional long-only investment strategy by taking advantage of profit opportunities from securities identified as both under- and over-valued.
Conceptually, the strategy has the goal to invest at the same time in stocks on the long side (buying undervalued stocks) and on the short side (selling overvalued stocks). If a long-short strategy uses the same position size for longs and shorts, the investment strategy has no directional market exposure. Hence, the investment return is the pure result of stock selection.