Chapter 21 Alternative Investments: Strategies and Performance KT Flashcards
Designed to exploit inefficiencies and opportunities in the equity market by creating simultaneously long and short matched equity portfolios of approximately the same size.
equity market-neutral strategy
Invests in the equity or debt securities of companies that are in financial difficulty and face bankruptcy or reorganization; these generally sell at deep discounts, reflecting their issuers’ weak credit quality.
distressed security strategy
A type of hedge fund that seeks to profit from unique events such as mergers, acquisitions, stock splits or buybacks.
event-driven strategies
Investing, generally using little or no leverage, in the junk bonds of a company the manager feels may get a credit upgrade or is a potential takeover target.
high-yield bond strategy
Investing simultaneously in long and short positions of the common stock of companies involved in a proposed merger or acquisition.
risk arbitrage strategy
A strategy that profits from price anomalies between related interest rate securities and their derivatives, including government and non-government bonds.
fixed-income arbitrage strategy
A fund where the net position must always be short. The fund may have long positions, but on a net basis, the fund must constantly be short.
short bias strategy
A type of hedge fund that seeks to profit by exploiting irregularities or discrepancies in the pricing of related stocks, bonds or derivatives.
relative value strategies
Invest in equity and debt securities of companies in emerging markets by using derivatives, short selling, and other complex investment strategies. As some emerging markets do not allow short selling and do not have viable derivative markets, these funds may not be able to hedge. As a result, performance can be volatile.
emerging markets alternative funds
Invests in all major markets, including equities, bonds, currencies, and commodities with a strategy based on predictions for major events affecting entire economies.
global macro strategy
An alternative strategy that looks for mispricing between a convertible security and the underlying stock.
convertible arbitrage strategy
A strategy where the manager tries to buy stocks they feel will rise more in a bull market and sell short stocks that will rise less. In a down market, good short selections are expected to decline more and good long selections will fall less.
long/short equity strategy
