Question

What are the different categories of hedge funds?  

Answer 1

Answer-

The different categories of hedge funds are

1) Event Driven Strategies - These hedge funds are major corporate events such as mergers, acquisitions and bankruptcies which gives movement in the stock market. Hedge funds are known to take advantage of such movements.

2) Equity Arbitrage -  This strategy revolves around making risk free bets to earn money. Equities are traded in many ways such as the spot market, sectoral indices, market indices and derivatives.

3) Mortgage Arbitrage - There hedge funds are mortgage backed securities and collateralized debt obligations. OTC derivative products are available for these securities.

4) Funds of Funds - This fund also accumulates money from investors just like other hedge funds.  The investing strategy of this fund is passive.

5) Emerging Markets - Emerging markets are countries with good opportunities. These countries are not developed well enough. Hedge funds can exploit the advantage as these countries have low regulations.

6) Global Funds - These funds do not take positions on individual companies or even sectors. They view the world of finance at a very macro level and predict those movements.