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Investment Banks, Hedge Funds, and Private Equity by David Stowell

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12

Hedge Fund Investment Strategies

The material in this chapter should be cross-referenced with Case Study 6, “Kmart, Sears, and ESL: How a Hedge Fund Became One of the World’s Largest Retailers.”

Hedge funds employ dynamic investment strategies designed to find unique opportunities in the market and then actively trade their portfolio investments (both long and short) in an effort to maintain high and diversified absolute returns (often using leverage to enhance returns). By contrast, most mutual funds only take long positions in securities and are less active in trading their portfolio investments (usually without leverage) as they attempt to create returns that track (and ideally outperform) the market. Some hedge funds attempt to exploit ...

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