Hedge Fund Investing: A Practical Approach to Understanding Investor Motivation, Manager Profits, and Fund Performance

Multistrategy Funds

A multistrategy fund offers investors a mix of equity and fixed-income strategies and may often also include a global macro desk and some macro-oriented trades. The typical focus of a firm that manages funds using a multistrategy framework is to deploy capital across multiple investment strategies, using a diversified set of instruments and financial markets. The investment strategies that are developed come from top-down ideas and product-specific information, as well as bottom-up analysis. Multistrategy funds use macro as well as fundamental research and quantitative analysis and proprietary models to develop trade ideas.

According to the company's website, Citadel Investments, the Chicago-based multistrategy fund, offers a wide range of strategies under a single umbrella. The firm offers investors a range of equity, convertible, macro, credit, energy, and fixed-income strategies:

Equities combine detailed, fundamental stock selection with a rigorous portfolio construction and risk management framework and focuses on liquid equity markets. Global fixed income deploys capital in the developed interest-rate markets, focusing on liquid products including nominal and inflation-protected government bonds, interest-rate swaps, futures, options, and agency mortgage-backed securities. Strategies are primarily concentrated in the G7 interest rate markets. The fundamental credit strategy combines detailed fundamental research and quantitative portfolio analysis to invest ...