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Long/Short Equity: Takes long equity positions while short-selling other equities or indices
Emerging Market: Specializes in emerging markets such as China, Brazil, India, etc
Sector Funds: Specializes in niche areas such as Healthcare, Industrials, or Consumer
Fundamental Growth: Invests in companies with more earnings growth than the broader market
Fundamental Value: Invests in companies that are considered undervalued
Multi-Strategy: Uses a combination of strategies
Event-Driven Style (also called Special Situations): The fund profits from price inefficiencies caused by
anticipated specific corporate events, such as bankruptcy, reorganization, divestitures, and legal situations.
Distressed Debt: Specializes in companies trading at discounts because of bankruptcy or the threat thereof.
Merger Arbitrage (also called Risk Arb): Profits from price inefficiencies relating to companies involved in
announced Mergers & Acquisitions activity; a typical position might involve buying the equity of an acquisition
target, and hedging the investment by shorting an appropriate amount of the equity in the acquirer.
Credit Arbitrage: Profits from relative value investments in corporate fixed income securities, such as
purchasing the unsecured debt of a corporation while selling short the secured debt of the same corporation.
Activist: Takes large positions in companies and uses this ownership stake to influence the decision making of
management in the companies.
Legal Catalysts: Profits from position taking with companies involved in major lawsuits.
Arbitrage Style (also called Relative Value): Profits from perceived price inefficiencies between related
securities. (Note that the finance term arbitrage strictly means a riskless profit seldom found in actual traded
securities markets. However, the term is used to also describe investment opportunities that have a relatively
high probability of profit with relatively low downside.)
Fixed Income Arbitrage: Profits from price inefficiencies between fixed income securities
Equity Arbitrage: Profits from price inefficiencies between equity securities (keeping a close balance
between long and short positions)
Convertible Arbitrage: Profits from price inefficiencies between convertible securities and their
corresponding stocks
Millennium Partners
Surveyor Capital (part of Citadel)
Visium Asset Management
Autonomy: Manager has the ability to run his own discretionary set of positions (known as a book),
with reduced stress from a potentially overbearing hedge fund owner.
Cost efficiency: Infrastructure is largely paid for by the employer, not the employee (sub-manager), and
the platforms generally provide back-office support and often trading support.
Potentially portable track record: Manager can often take performance track record to other funds or
spin off own hedge fund.
Large percentage of the profit: Payouts can be as high as 20% of profits at some funds.
Weighted average volatility of the longs has to be within a certain percentage of the weighted
average volatility of the short.
Potentially tenuous job security: A portfolio manager can make money for a number of years and have
one down year and get fired as a result.
Analyst can get a fixed payout, typically 5-20% of profit depending on the level of seniority.
Analyst has the potential to get the right to manage his own book (become a portfolio manager).
Analyst has the ability to be exposed to multiple investment styles at the fund.
Very high-pressure environment: analysts often compete directly with each other.
An analysts primary goal is to become a better investor, but some multi-managers are so focused on
the short term that analysts become fast-money investors.
Potentially higher turnover: Portfolio Managers can often fire analysts in a shorter period of time at a
multi-manager fund, as they often have a tremendous amount of pressure to perform quickly.
The fund has less dependency on short-term performance, so it is often a less stressful environment.
Payout is often discretionary, and in periods of strong performance, the partners are sometimes not as
generous as one might think they should be.