Key investment strategies of U.S. hedge funds

1. Long-short equity strategy.

In the U.S. hedge funds, about 60% take a long-short stock strategy. This strategy refers to going long on some stocks while shorting others, forming a long-short hedge portfolio. For example, during a bear market, there are many hedge funds that are long defensive, non-cyclical stocks, while then shorting strongly cyclical stocks.

2. Managed futures strategies.

A small number of hedge funds, instead of investing in equity-based assets, focus on futures markets, including financial futures represented by the S&P 500, as well as commodity futures and foreign exchange futures markets in New York, Chicago, etc. Of course, sophisticated managed futures hedge funds allocate their capital in specific proportions and invest in multiple futures species at the same time, never betting all of their capital on a single species.

In this way, a relatively robust futures portfolio is constructed, for example, by going long on industrial metals futures and short on certain agricultural futures in times of good economic growth; in other cases, the opposite is true. Or, when the currency continues to depreciate, will be short dollar against the euro and other foreign exchange futures, and at the same time do more gold, silver and other precious metals futures.

3. Global Macro Strategy.

According to the global macroeconomic situation of each region and country, choose different investment varieties and operation direction in the global financial market, this way is generally called "macro strategy", the most famous macro strategy hedge fund is Soros' Quantum Fund.

Hedge funds using macro strategies are expected to account for 10% of all U.S. hedge funds. Most of these hedge funds are global hedge funds that invest in multiple financial markets around the world, as well as in a variety of assets including stocks, bonds, foreign exchange, commodities, currencies, precious metals, etc.

Macro strategy hedge fund managers keep research on the current economic status and policies of major global economies and then choose an optimal portfolio approach. The most typical example is Soros shorting the British pound, he saw the pound staring at the deutsche mark, while the British economy is not as strong as the German economic development, so he built a: short the pound, short German and French stocks, while long deutsche mark and German bonds, long British stocks a series of hedge portfolio.

(Of course, people only know that Soros shorted the pound, do not know that he built a series of long and short hedge portfolio, his profits from the entire hedge portfolio rather than simply from shorting the pound).

4. event-driven strategy.

In the market there is a special crisis, or an irrational surge, or some listed companies in the case of special events, take the corresponding long and short investment strategy, generally known as "event-driven" type of hedge funds, this type of hedge funds each of the specific strategy is not the same, based on the hedge fund on the different events of the degree of expertise, so it is difficult to form a definitive strategy model.

5. Relative arbitrage strategy.

The United States has the world's most mature financial markets, from stocks, bonds, currencies, foreign exchange, futures, commodities, options and other forms of investment is very rich, which forms a spread for some assets in different forms, the use of these spreads for arbitrage type of investment, is part of the hedge funds specialize in investment strategies. Although the number of such hedge funds is small, but they are relatively safe investment approach, managing a disproportionate number of funds with them, from the size of the funds, the relative arbitrage strategy of hedge funds to manage assets accounted for about 10%.

6. Equity and futures portfolio strategies.

Strictly speaking, the stock index futures represented by the S&P 500, corresponding to the market should also be counted as the stock market, because the two have a synchronized rhythm of operation, so many hedge funds, on the use of the synchronization of stocks and financial futures, to build a hedge portfolio of stocks and futures.

This takes the more common form of going long on some stocks while shorting the entire index futures, which occurs mainly when one is long on some stocks while being bearish on the entire market. This approach was accepted by more and more hedge funds after 2000, because it allows them to capture the gains of rising stock positions while avoiding systemic market risk accordingly.

7. Shorting strategy.

There are a small number of hedge funds that specialize in finding various targets for shorting, they are like falcons floating over the U.S. financial markets, and their prey are those listed companies with potential problems and may have a big fall. After the Enron sabotage, these hedge funds began to appear and gradually attracted attention, but although these hedge funds easily become newsworthy and earn significant shorting income on a certain project, they are rarely able to obtain long-term high returns.

8. Programmed strategies.

The so-called programmed trading refers to the establishment of a quantitative investment model through various studies of the market, and then the model is designed into a computer program, and finally the computer performs specific investment operations according to the program. There are more and more hedge funds using programmed trading after 2000, and the most representative one is Renaissance's Grand Chapter Fund. They study the financial market through various scientific methods, then construct an individual investment model, and finally hand over to the computer to complete the buying and selling, and they are generally intra-day, ultra-short-term transactions, and through the compounding of numerous small profits, they form an overall better The overall better trading profits.

9. Option Betting Strategy.

The use of options to bet against the market hedge funds, not the mainstream, but they are also more and more attention, this hedge fund is easy to continue to lose a small amount of money, and then a big profit; may also continue to make money, and then a big loss. This is because options involve very high leverage and the nature of betting, so it is easier to make big gains and big losses. This investment strategy has emerged because many investment institutions have chosen to use options to hedge market risk, which has created the conditions for an investment approach that specializes in options speculation.

For example, the author of "The Black Swan" Taleb created a hedge fund, can be counted as an options hedging strategy, he and many investment institutions bet on the market trend, when the market fluctuations, he will suffer small losses; but if the market fluctuations, especially unexpected, short-term volatility, he will get huge gains, which is why he was in 2001 "9/11" and 2008 "subprime crisis" to obtain high returns.

Only, this type of investment requires the market to operate in a calm market, continuous to endure losses, sometimes compound losses will be relatively frightening, only fully understand the logic of this investment and fully believe in the investor, it is possible to use this investment strategy to obtain long-term ideal earnings, otherwise, it is easy to have a large loss.