CHAPTER 3
Hedge Fund Strategies
A BROAD RANGE OF STRATEGIES are operated under the hedge fund structure. This spectrum includes nonleveraged hedged styles and highly leveraged directional approaches.
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To comprehend these strategies, an investor must understand the different elements of investing of which they are composed. This knowledge builds a framework from which to compare the different approaches. Although some elements are not vastly different from those that constitute traditional investing methods, others are unique to hedge fund strategies. This chapter discusses five important groups of elements: tools and techniques, instruments and markets, performance, sources of return, and measures for controlling risk.
TOOLS AND TECHNIQUES ...