What strategies do hedge funds employ to earn their returns?

The Various Strategies of Hedge Funds

• Long/Short Equity.
• Market Neutral.
• Merger Arbitrage.
• Convertible Arbitrage.
• Event-Driven.
• Credit.
• Fixed-Income Arbitrage.
• Global Macro.

Which hedge fund strategy has the highest return?

Outside of equities, the highest-returning hedge fund strategies in 2020 were event-driven funds, which gained 9.3 percent for the year, according to HFR. Macro hedge funds returned 5.22 percent for the year, while HFR’s relative value index ended 2020 up 3.28 percent.

How do hedge funds measure returns?

Simple hedge fund returns Take the ending balance of your hedge fund account before it imposes its fees and divide it by the balance that you had at the beginning of the period. Subtract 1 and then multiply by 100, and the result gives you your percentage gross return from your hedge fund investment.

How much do good hedge funds return?

Average gains of +4.00% lifted YTD average returns to +11.02%, past the level in 2019 (+10.07%) and to the highest level since 2009 (+19.44%). While average returns in 2020 were elevated, there have been several years of similar returns since 2009 (+10% in 2019, +9% in 2017, +10% in 2013 and +11% in 2010).

How to see hedge fund performance by strategy?

You can drill down into this data to see key stats for each sub strategy. Click on the strategy you are interested in and you can then click through further into any sub strategy of interest. The size of the boxes indicates the proportionate size of a strategy amongst all of the funds monitored by Aurum’s Hedge Fund Data Engine.

How does a quantitative hedge fund strategy work?

Quantitative hedge fund strategies look to quantitative analysis (QA) to make investment decisions. QA is a technique that seeks to understand patterns using mathematical and statistical modeling, measurement, and research relying on large data sets.

How is conditional factor used in hedge fund strategy?

Section 9 introduces a conditional factor model as a unifying framework for understanding and analyzing the risk exposures of these strategies. Section 10 evaluates the contributions of each hedge fund strategy to the return and risk profile of a traditional portfolio of stocks and bonds. The reading concludes with a summary.

What was the first strategy of a hedge fund?

The first hedge fund, launched by Alfred W. Jones in 1949, used a long/short equity strategy, which is still in use on the lion’s share of equity hedge fund assets today.