Hedge fund objective stive for absolute returns. Seek to maximize returns in all marekt scenarios.
Typically set up as limited partnership, limited liability or offshore corp. Exempt from SEC regulation.
Typically take 1% of assets under mgmt + performance. High Watermark provision stipulates incentive fees are only based on returns above highest value achieved over life of fund. May push to take risks.
Long/Short Funds - largest category in term of size. these funds take long and short common stock position, use leverage, and invested globally.
Market-neutral funds - type of long/short fund that stfive to hedge against general market moves. Fund may still have long and short positions but positions offeset each other so effect is anet zero exposure to market.
- Global macro funds - make bets on direction of market, currency interest rate, or other factor. Typicall highly leveraged rely on derivatives.
- -Event driven funds capitalize on unique opportunity like distressed company or merger.