What do hedge funds do?
They invest their clients' money aiming for returns that beat the market, or that hold up when it falls, using strategies ordinary funds can't: short selling, leverage, derivatives and concentrated bets.
Common strategies
- Long/short equity: buying stocks expected to rise and shorting those expected to fall.
- Activist: buying a large stake in a company and pushing management for changes.
- Event-driven: trading around mergers, bankruptcies, spin-offs and other corporate events.
- Global macro: betting on interest rates, currencies, commodities and economies.
- Quantitative: trading on computer models, often very quickly and in thousands of stocks.
- Credit: investing in corporate debt, often distressed.
- Multi-strategy: many teams running different strategies under one roof.
Only some of these show up in a 13F. Long stock positions and options do; shorts, bonds, currencies and futures don't.
Related pages: What funds are trading now