Hedge Fund Strategy Due Diligence

Hedge Fund Due Diligence:
An Introduction to Hedge Fund Strategies

popular tactics employed by hedge funds
different approaches to a strategy
various forms of a sub strategy
Systematic
(Quantitative)
Discretionary
(Thematic)
Distressed
Special Situations
Activist
Merger Arbitrage
Fixed Income
Arbitrage
Statistical Arbitrage
Convertible Arbitrage
Yield Curve
Arbitrage
Capital Structure
Arbitrage
Carry Trade
Market Neutral
Volatility Arbitrage
Short-Only
Long/Short Equity
Growth
vs.
Value
Discretionary
vs.
Quantitative
Specialists
vs.
Generalists
Mortgage-Backed
Securities
Equity
Debt
Hedge Fund Strategies
Strategies
Sub Strategies
Styles
Global Macro
Event Driven Relative Value
Equity Hedge Credit
Managed Futures Emerging Markets
Systematic

Overview
4
Equity Hedge focuses on investing in cash equities and equity derivatives, such as
options, swaps and warrants. Managers can apply a variety of research approaches
and techniques and focus on different investment styles at once. Its sub strategies
are often categorized by net exposure, which is the difference between long and
short positions in a portfolio.
+ Long-Only
It is more of a mutual fund strategy which focuses
only on buying (aka. long) stocks and profiting
from their price appreciation.
Net
Exposure
Long/Short
(Long Bias)
There are more longs than shorts in a portfolio.
Shorts are used for generating profits or hedging
against downside risk.
Market Neutral
It longs one stock, or a basket of stocks, and
shorts another one simultaneously and profits from
the difference in price (aka. spread).
Long/Short
(Short Bias)
There are marginally more shorts than longs in a
portfolio. A manager often shifts to short bias when
a bear market is expected.
– Short-Only
Almost all positions in a portfolio are shorts and
longs are for hedging only. Short-only portfolio
tends to be highly concentrated.
Annualized Return 11.51%
Annualized Standard Deviation 9.02%
Downside Deviation 9.96%
Upside Deviation 9.81%
Max. Drawdown -30.59%
Sharpe Ratio 0.97
Sortino Ratio 1.06
Correlation w/ S&P500 0.79

Equity Hedge – Long/Short Equity (LSE)
5
Long/Short Equity focuses on taking both long and short positions in equity markets. Depending on a manager’s view, a long/short equity portfolio can have either a
positive net exposure (aka. long bias) or a negative net exposure (aka. short bias).
Research
Approaches
Bottom-Up
It studies the fundamentals of a company, which consist of quantitative factors, such as earnings, cash flows and liquidity, and qualitative
factors, such as product development, management team and corporate governance. A manager makes a buy/sell decision based on
his/her view on the company’s fundamentals. This approach may introduce more volatility to a portfolio when employed solely.
Top-Down
It studies the big picture – business cycles, overall market environment, the state of regional and global economies and their long-term
prospects for growth. The understanding of macroeconomics enables a manager to determine the industries, sectors and regions to invest
in as well as the appropriate gross/net exposure of the portfolio. In practice, it is often fused with the bottom-up approach.
Investment Styles
Growth vs. Value
Discretionary vs. Quantitative
Specialists vs. Generalists
Developed Markets vs. Emerging Markets
Instruments Traded
Cash Equities More Common
ETFs
Options
Swaps
Warrants Less Common

Equity Hedge – Long/Short Equity (LSE) (cont.)
6
Leverage*: Typical: 1.4x Maximum: 5.0x Range: 0.7 – 5.0x
Liquidity**: Redemption Frequency: 41 days Notice Period: 28 days
Avg. Fees***: Management Fees: 1.67% Performance Fees: 19.12%
Favorable Environment:
highly volatile markets
Unfavorable Environment:
low interest rates
Advantages:
1. profit from both long and short
positions
2. capital preservation during market
downturns
3. easy to understand and evaluate
Disadvantages:
1. exposure to beta risk which cannot
be fully hedged
2. similar trading ideas among
managers lead to crowded trades
3. vulnerable to short squeezes
Strategy Due Diligence (questions to ask during DD):
1. Between core and satellite positions, which ones are the main sources of return
for the past 2 years? What is the typical holding period for a core position? What
about a satellite position?
2. Are short positions for hedging or generating profits?
3. Does the fund adjust the portfolio’s net exposure? If yes, how often and what is
the trigger?
*Source: “Leverage, Hedge Funds and Risk”, Frank Barbarino, CAIA, NEPC, https://cdn2.hubspot.net/hubfs/2529352/Blog/09_07_nepc_leverage_hf_and_risk.pdf?t=1486746354842
**Source: “Trustee Series Paper4: Efficient Flows, Understanding liquidity in alternative investment funds”, Jack Inglis, CEO, AIMA, Tom Kehoe, CAIA, https://www.aima.org/static/uploaded/7656e745-4db1-4bf9-a09924216e53225c.pdf
***Source: Preqin, https://docs.preqin.com/reports/Preqin_Special_Report_Hedge_Funds_October_2012.pdf
Sharpe Ratio 0.49
Sortino Ratio 0.41

7
Growth Value
Description*:
Growth stocks have valuation characteristics indicating their
prospects for earnings, profitability and sales growth and capital
appreciation exceeding those of the broader equity markets.
Value stocks are often characterized by their inexpensive and
underpriced valuations against their peers in the broader equity
markets and their ability to generate high cash flows.
Dividend Policy: low or no dividend yields high dividend yields
Market Cap.: often seen among small- and mid-cap. stocks often seen among well-established large-cap. stocks
Advantages:
1. high upside potential
2. profits can be quick to realize
1. less risky
2. less volatile than the broader markets
Disadvantages:
1. high risk
2. more volatile than the broader markets
1. limited upside potential
2. profits can take time to materialize
Strategy Due Diligence:
1. What does the research process look like? What kinds of research approaches does the fund employ?
2. How does the fund determine the size of a position? What kinds of effects does rising/declining NAV have on position sizing?
3. How does the fund hedge against downside risk? Does the fund use ETFs for hedging?
4. What is the typical gross/net exposure of the portfolio?
5. Does the fund focus on a specific industry, sector or market?
LSE – Growth vs. Value
*Source: https://www.hfr.com/hfr-hedge-fund-strategy-definitions-equity-hedge

8
LSE – Growth vs. Value (cont.)
Sharpe Ratio 0.34
Sortino Ratio 0.27
Sharpe Ratio 0.54
Sortino Ratio 0.53

9
LSE – Discretionary vs. Quantitative
Discretionary Quantitative
Description:
Discretionary focuses on in-depth analysis of a company’s
fundamentals, such as profitability, cash flows, management team
and market environment, to ascertain its intrinsic and relative value.
It relies on a manager’s expertise in business operations, corporate
governance and management, accounting, and capital structure to
make informed buy/sell decisions.
Quantitative (aka. systematic or scientific) is a rule-based style that
uses data-driven analysis to value a broad universe of stocks. It
relies on statistical and mathematical models, technical indicators,
trend-following and pattern recognition techniques to make buy/sell
decisions. It allows a manager to hold a large number of positions
at relatively small weights.
Investment Horizon: mid- to long-term short- to mid-term
Leverage*: Typical: 1.3x Maximum: 2.0x Range: 0.3 – 1.0x Typical: 2.5x Maximum: 5.0x Range: 1.5 – 5.0x
Advantages:
1. a manager’s expertise and experience add value
2. long-term oriented and less swayed by short-term noise
1. no human emotions involved in the investment process
2. can screen and monitor a large set of investment opportunities
Disadvantages:
1. investment process is time consuming
2. exposure to key-man risk
3. portfolio can be overly concentrated
1. vulnerable to dirty data and inappropriate models
2. suffer from model degradation
3. periodic adjustments on trading models may lead to style drift
Notes:
Quantamental, a new style which fuses discretionary with quantitative, has become popular in recent years. It relies on statistical and
mathematical models to analyze a company’s fundamentals and make investment decisions accordingly. In addition, many discretionary
managers employ quantitative tools to help with their risk management.

10
LSE – Quantitative
Sharpe Ratio 0.92
Sortino Ratio 1.54
1. How many models does the fund currently manage? What is the typical life span of a model?
2. Does the fund optimize its models? Who is responsible for optimization?
3. How often is an old model superseded by a new model?
4. How many new models has the fund developed in the past 12 months? How many are currently in development? How long does it take to launch a new model?
5. What does the model development process look like? What kinds of tests have been done on a model before implementing it (e.g. back-testing, real-time testing,
stress testing)? Has a model been tested with data that is different from the data utilized in developing it?
6. What kind of risk management system does the fund employ? If the system is computerized, does human intervene?

11
LSE – Specialists vs. Generalists
Sectors
Name Examples Name Examples
Energy Exxon Mobil Corp., Chevron Corp. Consumer Discretionary NIKE, Inc., Starbucks Corp.
Materials Rio Tinto Group, Dow Inc. Consumer Staples Walmart Inc., Unilever PLC
Industrials The Boeing Co., Caterpillar Inc. Information Technology Apple Inc., NVIDIA Corp.
Utilities Duke Energy Corp., Exelon Corp. Communication Services Alphabet Inc., Netflix, Inc.
Healthcare Pfizer Inc., AbbVie Inc. Real Estate Prologis, Inc., Public Storage, Inc.
Financials Visa Inc., Wells Fargo & Co.
Specialists Generalists
Description: Specialists focus only on one or two specific sectors. Generalists focus on all industries and sectors with no restrictions.
Advantages:
1. easy to identify a manager’s edge
2. easy to monitor and evaluate a manager’s performance
1. a wide array of investment opportunities
2. nimble and responsive to sector rotation
Disadvantages:
1. investment opportunities are limited
2. returns can be lumpy and volatile
3. less options when hedge against downside risk
1. difficult to identify a manager’s edge
2. concerns with a manager’s ability and expertise in covering
multiple industries and sectors

Equity Hedge – Short-Only
12
Short-Only focuses on taking advantage of anticipated price deprecation of a company’s stock through short-selling. In contrast to what the name suggests, a short-only
portfolio does include various long positions for hedging purpose. A manager tends to place heavy emphasis on a company’s fundamentals and hold fewer and more
concentrated positions than other sub strategies.
bear markets with high volatility
bull markets with low interest rates
Advantages:
1. a good portfolio diversification tool
2. less crowded trades due to untapped
investment opportunities
3. short rebate
Disadvantages:
1. dividend payments on short positions
2. vulnerable to short squeezes
3. positions have limited upside but
unlimited downside
Notes:
1. To protect the portfolio from short squeezes (e.g. GME & AMC in 2021), a
manager rarely discloses live positions. It is more reasonable to inquire about
historical positions than pressing for current ones during due diligence.
2. Betting against the markets demands a lot of mental agility and toughness in
addition to investment skills. As such, it is important to ascertain a manager’s
ability to cope with pressure and stress.
1. What kinds of research approaches does the fund employ? What does
the investment process look like?
2. Does the fund actively avoid shorting companies with high dividend
yields? How does the fund manage its dividend obligations?
3. What kinds of instruments does the fund invest in?
4. How many positions does the fund typically hold?
5. What is the typical holding period for a position?
6. What is the typical net exposure of the portfolio?
7. What is the typical liquidity of the portfolio?
8. Who is responsible for managing relationships with prime brokers?
9. How does the fund hedge against risks, especially tail risk?
10.What kind of risk management system does the fund employ? If the
system is computerized, does human intervene?
*Source: Bertelli (2007), “The Complete Guide to Hedge Funds and Hedge Fund Strategies”, Daniel Capocci

Overview
14
Event Driven focuses on companies that experience corporate actions such as
mergers & acquisitions, recapitalizations, restructuring, bankruptcy and other
activities that may create situations in which there will be a perceived difference
between the current market prices of a company’s securities and the valuations to be
received upon successful completion of such an activity.
Liquidity*: Redemption Frequency: 94 days Notice Period: 48 days
Avg. Fees**: Management Fees: 1.67% Performance Fees: 19.12%
Advantages:
1. performance is mostly independent
from the broader markets
2. ability to invest in securities across
the entire capital structure
Disadvantages:
1. liquidity is the lowest among all
strategies
2. more due diligence effort required
than other strategies
1. What types of corporate actions does the fund invest in?
2. What are the time frames of the corporate actions the fund currently invests in?
3. How frequently are theses reevaluated? What happens if a corporate action
does not materialize as expected?
4. What is the fund manager’s background in corporate actions? Does the
manager have a proven track record in communicating with shareholders?
*Source: “Trustee Series Paper4: Efficient Flows, Understanding liquidity in alternative investment funds”, Jack Inglis, CEO, AIMA, Tom Kehoe, CAIA, https://www.aima.org/static/uploaded/7656e745-4db1-4bf9-a09924216e53225c.pdf
**Source: “State of Institutional Fees Report: Hedge Funds”, Peter Laurelli, Global Head of Research, eVestment, https://hedgenordic.com/wp-content/uploads/2019/09/eVestment-Hedge-Fund-Fees-Report.pdf
Sharpe Ratio 1.51
Sortino Ratio 1.24

Event Driven – Merger Arbitrage
15
Source: “What is an ’Event Driven’ Hedge Strategy”, Franklin Templeton Source: “Overview of Hedge Fund Categories”, Thomas Ian Alessie, Fundana
Deal Types Investing Approaches
Cash
The acquiring company makes an offer to
purchase the target company’s stock at a
certain price in cash.
A manager takes a long position on the target
company’s stock upon the announcement of the deal
and exits upon the completion of the deal.
Stock
The acquiring company makes an offer to
purchase the target company by exchanging its
own stock for the target company’s stock at a
specified exchange ratio.
A manager longs the target company’s stock and
shorts the acquiring company’s stock upon the
announcement of the deal and exits both positions
upon the completion of the deal.
Deal Sourcing*
speculation based on a
company’s fundamentals
Speculative,
High Risk
news spread via rumor
mills, e.g. Reddit
13D Filings
an announcement of
searching for buyers
an issuance of a letter of
intent from a buyer
Proven,
Low Risk
an officially announced
M&A agreement
*Source: “Merger Arbitrage How to Profit from Global Event-Driven Arbitrage”, Thomas Kirchner
Merger Arbitrage (aka. Risk Arbitrage) primarily focuses on equity and equity linked instruments. By betting on whether companies can successfully complete their
mergers & acquisitions, a manager aims to profit from the difference of companies’ stock prices between at the time of the announcement of the deal and at the time of the
completion of the deal.

Event Driven – Merger Arbitrage (cont.)
16
plenty restructuring and consolidation
activities
1. lack of deal flow
2. economic downturns
Advantages:
1. steady returns
2. low correlation with the broader
markets
3. easy to understand and monitor
Disadvantages:
1. no hedges when a deal falls through
2. short-term performance tends to be
volatile
3. exposure to regulatory hurdles
2. How many deals are currently in the portfolio?
3. How does the fund determine the size of a position? What kinds of effects does
rising/declining NAV have on position sizing?
4. How does the fund source and monitor deals and assess their likelihood?
5. Does the fund use options or other derivatives?
6. How does the fund hedge against risks?
**Source : “State of Institutional Fees Report: Hedge Funds”, Peter Laurelli, Global Head of Research, eVestment, https://hedgenordic.com/wp-content/uploads/2019/09/eVestment-Hedge-Fund-Fees-Report.pdf
Sharpe Ratio 1.42
Sortino Ratio 2.45

Event Driven – Activist
17
Activist is a sub strategy often employed by funds with vast resources. A manager, who believes a company’s management team is not operating in a way that maximizes
its shareholder value, will attempt to acquire a significant amount of the company’s outstanding shares so as to obtain proxy votes and exert influence over the company’s
operations, with a hope to increase the value of its stock.
Characteristics of Activists
1. targets range from small-cap. companies to conglomerates
2. only active in mature markets like US, part of Europe and Japan
3. employ a bottom-up research approach and specialize in corporate finance
4. average holding period is around 1.8 years
Characteristics of Target Companies
1. cheap valuations – undervalued based on fundamentals
2. poorly structured balance sheet with excessive liquidity
3. weak profitability
4. candidates for corporate actions, such as mergers & acquisitions and spinoffs
Common Tactics To Increase a Company’s Value
Financial Restructuring:
1. reduce excessive liquidity, e.g. increase
dividend & issue shares buyback
2. alter leverage structure, e.g. retire
outstanding debt & restructure debt
Operational Turnaround:
1. increase revenue
2. reduce costs
3. change corporate governance
Strategic Turnaround:
1. mergers & acquisitions
2. spinoffs
3. joint ventures

Event Driven – Activist (cont.)
18
Common Techniques*
Friendly:
A manager works with the target company’s management team to
facilitate necessary changes and achieve desired outcomes.
• communicate privately with the target company’s board members and
management team and present ideas
• seek board representation by gaining enough support from shareholders
without initiating a proxy contest
• submit formal shareholder proposals and publicly comment on the company’s
management team
Hostile:
A manager forces the target company’s management team to meet
his/her demands through means such as proxy fights, litigations, etc.
• wage a proxy contest against the current board of the target company in
hope to replace the board and/or gain board representation
• file lawsuits against the target company
• acquire the company outright, similar to private equity
*Source: “Unlocking Value: the role of activist alternative investment managers”, AIMA, Simmons & Simmons, Brav et al (2013a),
**Source: “The Complete Guide to Hedge Funds & Hedge Fund Strategies”, Daniel Capocci
Investment Process**
❖ Positions in “Waiting” act as portfolio diversifiers and rarely go above 5% of total outstanding
shares of their respective companies.
❖ Positions in “Active phrase” usually represent 5% - 30% of total outstanding shares of their
respective companies.
❖ A portfolio usually holds 10 – 15 positions of which 2 – 3 of them are in “Active phrase”.

Event Driven – Activist (cont.)
19
Instruments: Cash Equities Options Warrants
low interest rates, low capital investment
and regulations promote shareholder
rights
regulations favor employment stability
over shareholder rights and corporate
profitability
Advantages:
2. an alternative to long-only and private
equity
Disadvantages:
1. portfolio tends to be highly
concentrated
2. illiquid and demands a long-term
capital commitment
1. What is the fund manager's background in corporate governance and
shareholder rights?
2. Does the manager have a proven track record in communicating and working
with board members and shareholders?
4. How many positions does the fund typically hold? How many of them are active?
Sharpe Ratio 0.30
Sortino Ratio 0.24

Event Driven – Distressed
20
Distressed Securities are issued by companies who are facing financial distress and valued at a deep discount. These securities include publicly traded debt securities
(e.g. bonds & bank debt), privately held debt securities (e.g. trade claim) and equities (e.g. orphan stocks & preferred stocks).
Distressed focuses on companies that are experiencing financial distress and either approaching, entering, going through or coming out of bankruptcy. A manager, who is
specialized in bankruptcy laws, restructuring and reorganizations, invests in these companies and hopes to profit from their successful turnaround. This sub strategy is
often considered as an alternative to traditional private equity.
approach bankruptcies
negotiate out-of-court
restructuring with creditors
file for bankruptcies
post-bankruptcy
reorganizations
Target Companies
long distressed bonds,
claims and bank loans
short bonds and bank debt;
capital structure arbitrage
Pre default Early bankruptcy Mid bankruptcy Late bankruptcy Emergence
Enterprise
Value
Trading
Techniques
long bonds, claims and
equities (orphan shares)
Time
Finding Value Across the Full Credit Cycle
Source: RMF Investment Management, a whole owned subsidiary of Man Group plc.
https://www.opalesque.com/files/ManDistressed_investing_Final.pdf

Event Driven – Distressed (cont.)
21
Active*
The goal is to influence a company’s restructuring process by acquiring a
significant amount of the company’s debt and/or equity.
Control
A manager takes charge of a company’s restructuring process by providing
necessary capital, overseeing financial and operational restructuring activities,
and help rebuild the company’s management team.
Ways of Gaining Control:
1. submit a restructuring plan
2. acquire the company’s outstanding debt
3. acquire the company’s voting shares
Non-Control
A manager does not take charge of the restructuring process and only works in
an advisory capacity. This approach restricts the manager’s ability to dictate the
process but is less labor-intensive.
Notes:
1. Main sources of return are coupon payments and capital appreciation.
2. Average holding period is 2 - 3 years.
3. It focuses on small- and mid-cap. companies.
4. Investment opportunities exist throughout the entire credit cycle.
Passive*
A manager acquires debt and/or equity of a distressed company when he/she
believes the market has overestimated the risk associated with the company’s
restructuring and reorganization. The manager can profit from selling the
securities at the intrinsic value once the perceived risk has been mitigated and/or
upon the company’s successful turnaround. The manager does not participate in
the company’s restructuring process.
Notes:
1. Main sources of return are coupon payments and capital appreciation.
2. Average holding period is 0.5 - 2 years.
3. It focuses more on trading than investing.
4. It focuses mainly on large-cap. companies.
5. Investment opportunities are cyclical and often exist in the late stages of a
credit cycle.
*Source:
1. RMF Investment Management, a whole owned subsidiary of Man Group plc.
2. “Distressed Debt”, Babson Capital White Paper, January 2010, https://valuewalkpremium.com/wp-
content/uploads/2014/09/Distressed-Debt-White-Paper-201001.pdf

Event Driven – Distressed (cont.)
22
economic recovery
widening credit spreads
Advantages:
1. high reward-to-risk ratio
2. trades are less crowded
Disadvantages:
1. illiquid & long-term commitment
2. difficult to measure progress
1. What is the fund manager’s background in restructuring process, bankruptcy
laws, contractual rights of investors, loan covenants and bond indentures?
2. How does the fund source deals?
3. At what stage(s) of the credit cycle does the fund invest in?
4. How does the fund hedge against risks? Does the fund use CDS for hedging?
5. For active, does the fund typically take a control or non-control approach? If the
fund does both, how does it decide on a given position?
6. For passive, what kinds of securities and instruments does the fund invest in?
How does the fund determine the size of a position? What kinds of effects does
Sharpe Ratio 1.53
Sortino Ratio 1.11
**Source: Preqin, https://docs.preqin.com/reports/Preqin_Special_Report_Hedge_Funds_October_2012.pdf

Event Driven – Special Situations
23
Examples of Special Situations**
Privatization
An individual investor or a group of investors buys out most
of a company's outstanding shares, which effectively delists
the company from stock exchanges. The offering price is
often higher than the current market price.
Spinoffs
A subsidiary or division is separated from a company and
becomes a new, independent company. Shares of the new
company are given to existing shareholders as well as
offered via an IPO.
Insider Trading
Management, officers or any beneficial owners with more
than 10% of a company’s equity buy or sell shares of that
company. Insider buying is viewed as a bullish sign, vice
versa for insider selling.
Divestments
Disposal of some or all of a company's assets by selling,
exchanging, closing down or through bankruptcy.
Divestments can free up cash, eliminate non-performing
business and reduce costs.
Stock Buybacks
A company buys back its outstanding shares to reduce the
number of publicly traded shares, which inflates EPS and the
value of its stock.
Public Offerings
A publicly traded company offers new shares (aka. dilutive
offerings) or insider-held shares (aka. non-dilutive offerings)
to public.
Recapitalization
A company restructures its balance sheet by changing the
proportion of debt to equity. It can be either a deleveraging
process or issuing more debt to buy back shares.
Litigations
A company has pending lawsuits. The outcome may have a
significant impact on the valuation of its stock.
Special Situations, by investing in equity and equity linked instruments, primarily focuses on companies that are currently engaged in corporate transactions, security
issuance/repurchase, asset sales, division spinoffs or other catalytic situations which can bring a significant change to their equity valuations*.
*Source: HFR, https://www.hfr.com/indices/hfri-ed-special-situations-index
**Source: “You Can Be a Stock Market Genius Even if Your’re Not Too Smart”, Joel Greenblatt, 1997

Event Driven – Special Situations (cont.)
24
Advantages:
2. risk and reward can be determined
before entering a trade
Disadvantages:
1. situations/corporate actions may not
occur as expected
2. trades tend to be crowded due to
limited investment opportunities
1. What is the fund manager’s background in corporate actions and capital
structure?
2. What kinds of “situations” does the fund invest in?
3. How does the fund source and monitor “situations” and assess their likelihood?
4. What kinds of securities and instruments does the fund invest in?
6. How does the fund hedge against downside risk?
7. What is the typical position turnover rate? What does the fund do if a “situation”
does not pan out during the expected time frame?
Sharpe Ratio 1.42
Sortino Ratio 2.45
Instruments: Cash Equities Options Warrants

Overview
26
Sharpe Ratio 1.10
Sortino Ratio 0.85
Relative Value is a non-directional strategy focusing on identifying and exploiting
valuation discrepancies among securities and asset classes that share similar
fundamental or technical characteristics. A manager employs a variety of research
approaches and techniques to develop theses and takes arbitrage positions in
equities, fixed income, derivatives and hybrid securities.
Instruments: Cash Equities Cash Bonds Derivatives Convertibles
1. volatile markets
2. high performance dispersion among
securities and asset classes
1. crowded markets
2. performance of securities and asset
classes are highly correlated
Advantages:
1. highly liquid
2. constantly hedge against downside
risk
Disadvantages:
1. exposure to tail risk
2. vulnerable to dirty data and
inappropriate models
**Source: “State of Institutional Fees Report: Hedge Funds”, Peter Laurelli, Global Head of Research, eVestment, https://hedgenordic.com/wp-content/uploads/2019/09/eVestment-Hedge-Fund-Fees-Report.pdf

Relative Value – Fixed Income Arbitrage
27
Fixed Income Arbitrage focuses on exploiting price inefficiencies among fixed-
income securities from either the same or different issuers. The inefficiencies are
often led by changes in interest rates and credit ratings. A manager takes an
arbitrage position by simultaneously longing and shorting individual securities, or
baskets of securities, and profits from the difference in price (aka. spread).
Popular Spreads for Arbitrage:
Yield Curve Corporate/Treasury Municipal/Treasury Cash/Futures
Downside Deviation -
Sharpe Ratio 0.91
Sortino Ratio -
Leverage*: Typical: 8.0x Maximum: 15x Range: 2.0 – 10x
Advantages:
2. a wide range of investment options
Disadvantages:
1. liquidity of OTC derivatives can be
scarce
2. coupon payments on short positions
1. How sensitive is the overall portfolio to changes in interest rates?
2. What kinds of securities and instruments does the fund invest in? What is the
typical liquidity of the portfolio?
3. What is the typical net exposure or carry (i.e. positive or negative) of the
portfolio?

28
Yield Curve Arbitrage
Yield refers to the percentage return on a given fixed-income security.
Yield Curve is a visual representation of yields of similar fixed-income securities against their maturities, ranging from the shortest to the longest.
Yield Curve Arbitrage focuses on taking long and short positions on different points of a yield curve (e.g. 2-year vs. 10-year Treasuries) and profiting from the price
difference led by changes in the curve’s slope. A manager often trades futures contracts and/or swaps instead of directly buying/selling cash bonds.
*Source: “A Primer on Interest Rate Markets and Relative Value”, Ardea Investment Management, https://www.ardea.com.au/wp-content/uploads/ARDE-202101_Rates-Market-Primer-_fin.pdf
**Source: “Investment Strategies of Hedge Funds”, Filippo Stefanini
Changes in Yield Curve Throughout the Economic Cycle
Early Growth (Expansion) Mid-Growth (Peak) Late Growth (Contraction) Recession (Trough)
Steepening Upward Sloping (aka. positive slope) Flattening Inverting (aka. negative slope)
Steepening Curve*
the back-end curve rises more than the front-end
Flattening Curve*
the front-end curve rises more than the back-end
Curvature Curve (aka. Butterfly)**
a yield curve has either a convex or concave shape
❖ Note: As a bond’s yield and price are negatively correlated (i.e. the higher the yield, the lower the price), the bull/bear scenarios illustrated here are denoted bullish/bearish bond prices.

29
Capital Structure Arbitrage
Capital Structure is the mix of debt and equity financing a company uses to fund
its operations and growth.
Debt:
raise capital through selling bonds to
investors with a promise to pay back in
full plus interest in the future
Equity:
raise capital through selling shares of
the company (aka. ownership interest)
to investors
low interest rates
declining earnings
Advantages:
1. interest payments can be tax
deductible
2. a company can plan ahead with its
cash flows
Advantages:
1. a company does not need to pay
the money back
2. management may receive support
from investors
Disadvantages:
1. direct impact on a company’s credit
rating
2. exposure to bankruptcy risk
Disadvantages:
1. sharing ownership and loss of
control
2. sharing profits with investors
Capital Structure Arbitrage focuses on taking advantage of price inefficiencies
among securities of the same issuer with different seniority or from different asset
classes (equity vs. fixed income). A manager typically targets stressed or distressed
companies within a specific industry or sector, as they often have a highly leveraged
balance sheet.
Popular Techniques
1. Bonds vs. Stocks:
Long bonds and short stock, or vice versa. A company’s bond price is usually
less responsive than its stock price during catalytic events.
2. Bonds vs. Bonds:
Take an arbitrage position between bonds with different seniority.
3. Bonds vs. Credit Default Swaps (aka. Credit Basis Trading):
For negative basis (bond spread > CDS spread), long bonds and long CDS.
For positive basis (bond spread < CDS spread), short bonds and short CDS.
4. Credit Default Swaps vs. Stocks:
When CDS spread is low, short CDS and short stock.
When CDS spread is high, long CDS and long stock.

30
Capital Structure Arbitrage (cont.)
widening credit spreads
a strong economy
Advantages:
1. profit from both equity and fixed-
income securities
2. a portfolio hedging tool during market
downturns
Disadvantages:
1. vulnerable to specific risk
2. become complicated when dealing
with multiple subsidiaries with cross-
liabilities
3. structured products like CDS are
difficult to price
1. What is the fund manager’s background in capital structure, loan covenants and
bond indentures?
2. What kinds of securities and instruments does the fund invest in? What is the
typical liquidity of the portfolio? What is the liquidity like of the structured
products in the portfolio?
3. How does the fund manage cash-synthetic basis risk?
4. Which side of the portfolio, long or short, has been the main profit generator for
the past quarter? 12 months? and 2 years?
5. Are short positions for hedging or generating profits?
Sharpe Ratio 0.62
Sortino Ratio 0.35

31
Carry Trade
Bond Carry Trade focuses on borrowing at a low interest rate (aka. cheap money)
to finance the purchase of bonds with higher yields. For example, with a positively
sloped yield curve, a manager borrows 3-month T-bills to finance the purchase of
10-year Treasury.
Currency Carry Trade focuses on borrowing a currency with a low interest rate to
finance the purchase of another currency that offers a higher yield or securities
denominated by that currency. For example, a manager borrows Japanese yen to
buy Mexican bonds.
Source: “An Introduction to Global Carry”, Susan Roberts, CFA, Campbell & Co.,
https://www.cmegroup.com/education/files/an-introduction-to-global-carry.pdf
Source: Jefferies & Co., Vantage FX, https://www.vantagefx.com/education/carry-trading-and-the-forex-market/
Changes in Market Variables Throughout the Economic Cycle
Interest Rates Stable Increasing Increasing Falling
Currency Appreciate Appreciate Appreciate Depreciate
stable markets
economic uncertainty
Advantages:
various investment opportunities
Disadvantages:
exposure to interest rate and currency risk

32
Fixed Income Arbitrage – Honorable Mentions
Futures Basis Trading*
Basis = Spot Price – (Futures Price x Conversion Factor)
A manager trades the basis by taking arbitrage positions between
cash Treasurys and their associate futures contracts and profiting
from the difference in price.
1. Long the basis:
buy cash Treasurys and sell a number of futures contracts
equal to the conversion factor for every par value of the
cash Treasury
2. Short the basis:
sell cash Treasurys and buy a number of futures contracts
equal to the conversion factor for every par value of the
cash Treasury
Swap Spread Arbitrage
A manager takes an arbitrage position by entering two separate
trades (aka. legs):
leg 1: enter a swap to receive a fixed coupon rate and pay a
floating rate
leg 2: short a Treasury bond with the same maturity through repo
financing
It bets on whether (fixed coupon received on the swap + repo
received on the margin) > (floating rate paid on the swap +
coupon paid on the Treasury). The profit is the net of the cash
flow.
Depending on a manager’s view, he/she can take a reversed bet
and profit from the opposite cash flow.
*Source: 1. “Understanding Treasury Futures”, Nicholas Johnson, John Kerpel, Jonathan Kronstein, CME Group, https://www.cmegroup.com/education/files/understanding-treasury-futures.pdf
2. “Forwards & Futures”, Mohamed Moheyeldin, Central Bank of Egypt, March 2014, https://cmi.comesa.int/wp-content/uploads/2016/03/Treasury-Bond-Futures.pdf

Relative Value – Convertible Arbitrage
33
Convertible Bonds are hybrid securities that possess both bond and equity characteristics. While they pay out coupons like a normal bond, convertible bond holders are
also able to convert these bonds into a specific number of shares of the issuer's common stock at a predetermined price.
Convertible Arbitrage focuses on an investment process designed to isolate attractive opportunities between the price of a convertible bond and the price of a non-
convertible security of the same issuer and profit from their price difference.
The Convertible Fair Value Price Track Popular Techniques
Delta Hedge – Total Return & Equity Alternatives (Hybrid & Equity Characteristics)
Delta measures how much a convertible bond price would change based on the
changes in its underlying stock price. Delta Hedge aims to neutralize delta by
buying convertible bonds and shorting the underlying stock simultaneously.
Sources of Return:
1) improvements in credit ratings; 2) rising implied
volatility; 3) gamma trading; 4) declining interest rates; 5)
corporate actions (e.g. M&A & spinoffs)
Risks: 1) declining implied volatility; 2) widening credit spreads
Restructuring – Yield Alternatives (Distressed & Fixed-Income Characteristics)
It focuses on low-rating, high-yield convertible bonds of which the issuers are
currently facing financial distress (aka. busted convertibles). A manager, despite the
market’s pessimism, bets on the issuers’ ability to make successfully turnaround.
Credit default swaps and interest rate swaps are the main hedging tools.
Source: “Gamma Trading: Why Big Market Swings Can Be Good News” by Jason Hill, SVP and David O’Donohue, SVP,
Calamos Investments. https://www.calamos.com/blogs/voices/2015-11-20-jh-do-gamma-trading/

34
Convertible Arbitrage – Gamma Trading
Gamma measures how much the delta of a convertible bond would change based on the changes in its underlying stock price.
Gamma Trading is the adjustment process for maintaining a desired level of delta hedge in response to the changes in stock price. When a stock goes up, the delta goes
up along with it. A manager needs to short additional shares to stay on a similar delta neutral hedge. Conversely, when the stock falls, the delta falls as well. The manager
needs to cover shares to remain on the neutral hedge.
As such, the manager sells the stock when it goes up and buys it when it comes down. The higher the volatility of the stock price, the more opportunity the manager has to
buy low and sell high.
Gamma Trading Illustration
Source: “Gamma Trading: Why Big Market Swings Can Be Good News” by Jason Hill, SVP and David O’Donohue, SVP,
Calamos Investments. https://www.calamos.com/blogs/voices/2015-11-20-jh-do-gamma-trading/

Relative Value – Convertible Arbitrage (cont.)
35
1. high/rising volatility
2. a large number of convertible issues
1. low/declining interest rates
2. widening credit spreads
Advantages:
1. performance is not correlated with
either bond or equity markets
2. various investment opportunities and
sources of return
3. steady returns with low volatility
Disadvantages:
1. complex – difficult to monitor and
evaluate
2. exposure to specific risk and liquidity
risk
3. dividend payments on short positions
1. How does the fund value convertible bonds and their underlying stocks? What
kinds of valuation tools/models does the fund employ?
2. Does the fund focus on investment grade convertible bonds, below-investment
grade convertible bonds (i.e. busted convertibles), or both?
3. What kinds of hedging techniques does the fund employ?
4. What is the fund manager’s background in equity and fixed income?
Sharpe Ratio 0.85
Sortino Ratio 0.52

Relative Value – Statistical Arbitrage
36
Statistical Arbitrage employs statistical and mathematical models to exploit the relative price movements among securities. A manager takes an arbitrage position by
simultaneously longing and shorting individual securities, or baskets of securities, and profits from the difference in price (aka. spread). The holding period, which varies by
styles and techniques, can last from minutes to weeks. Many funds have employed computers to automate the investment process, which ranges from effectively
identifying trading opportunities to successfully executing trades, with little to no human intervention.
Instruments: Cash Equities Derivatives
Leverage: varies according to the instruments and securities traded
Avg. Fees*: Management Fees: 1.74% Performance Fees: 20.98%
1. highly volatile markets
2. high/rising interest rates
1. sideways, directionless markets
2. crowded markets
Advantages:
1. various trading opportunities
2. highly liquid with a low risk of
redemption suspensions
3. less human emotions involved and
tend to perform consistently without
style drift
Disadvantages:
evaluate
3. not flexible and can suffer from
model degradation
*Source: Preqin, https://docs.preqin.com/reports/Preqin_Special_Report_Hedge_Funds_October_2012.pdf
1. How many models does the fund currently manage? How many models does
the fund typically manage at any given time?
2. What kinds of tests have been done on a model before implementing it (e.g.
back-testing, real-time testing, stress testing)? Has a model been tested with
data that is different from the data utilized in developing it?
3. How often does the fund optimize its models? Who is responsible for
optimization?
4. What is the typical life span of a model? How often is an old model
superseded by a new model?
5. How does the fund allocate its capital to each model?
6. Does human intervene in any part of the investment process? If yes, how
often and what is the trigger?
7. What kind of risk management system does the fund employ? If the system
is computerized, does human intervene?

37
Market Neutral
Market Neutral (aka. pairs-trading or mean reversion) is designed to exploit market inefficiencies by simultaneously longing and shorting two individual securities, or
baskets of securities, that are highly correlated. Through shorting the outperforming one and longing the underperforming one, a manager bets that the two securities that
have been trading outside of their supposed price levels will eventually revert back to their mean. While it is traditionally quantitative driven, many equity market neutral
funds have employed a fundamental oriented research approach to identify trading opportunities and build their portfolios.
Most market neutral portfolios are designed to be either beta, dollar or factor neutral.
Strategy Illustration Approaches to Security Selection
Fundamentals
A manager selects and pairs securities based on their fundamentals, such as PE,
Price/Book ratio, EPS, etc. Pairs are usually identified within the same industry or
sector.
Quantitative
By relying on various statistical and mathematical models, a manager selects and
pairs securities based on the belief that their past price behavior will repeat again
in the future.
Technical
Through analyzing different technical indicators, such as RSI, Bollinger Bands
and SMA, a manager selects and pairs securities based on their price momentum
and trends.

38
Market Neutral (cont.)
Avg. Fees*: Management Fees: 1.69% Performance Fees: 19.44%
2. high/rising interest rates
1. crowded markets
2. low volatility
Advantages:
1. performance is independent from the
broader markets
2. returns tend to be steady and less
affected by sector rotation or other
beta factors
Disadvantages:
1. vulnerable to extreme volatility (aka.
tail risk)
2. vulnerable to execution risk – failure
to execute long and short positions
simultaneously
1. What does the fund aim to neutralize, beta, dollar or factor(s)?
2. Does the fund adjust its long and/or short positions to maintain neutrality? If yes,
how often? What is the trigger? What does the adjustment process look like?
4. Does the fund rely on fundamental, quantitative or technical approach when
select and pair securities?
5. How does the fund hedge against extreme volatility? For example, if a fund
invests in equities, how does the fund manage pairs’ relationships during
earning seasons?
*Source : “State of Institutional Fees Report: Hedge Funds”, Peter Laurelli, Global Head of Research, eVestment, https://hedgenordic.com/wp-content/uploads/2019/09/eVestment-Hedge-Fund-Fees-Report.pdf
Sharpe Ratio 1.01
Sortino Ratio 1.21

39
Volatility Arbitrage
Volatility Arbitrage focuses on taking advantage of the mispricing between implied
volatility of an option and forecasted volatility of the option’s underlying asset. It is
highly sensitive to changes in interest rates and the valuation of the issuer's equity.
Popular Techniques
1. buy and sell options when the implied volatility is rich or cheap based on
valuations
2. take arbitrage positions by identifying opportunities from the mispricing of
particular strikes, expiration dates and/or maturities
3. delta neutral – long options and short the underlying stock simultaneously
Advantages
1. a portfolio hedging tool during
market downturns
2. returns can be exceptionally high
3. highly liquid with a low risk of
redemption suspensions
Disadvantages
evaluate
2. vulnerable to tail risk
3. success is largely dependent on the
accuracy of valuation models
Strategy Due Diligence (Questions to ask during DD):
1. What valuation tools/models does the fund employ?
2. How does the fund hedge against risks?
Sharpe Ratio 0.61
Sortino Ratio 1.64

Overview
41
Global Macro focuses on making investments across different asset classes and markets around the globe by analyzing macroeconomic and geopolitical trends. It is the
most famous and flexible hedge fund strategy of all. A manager often employs a mix of top-down and bottom-up research approaches and takes both directional bets and
arbitrage positions.
Asset Classes Traded
Name Examples Instruments
Currencies USD, EUR, JPY Futures, Options, Swaps & Forwards
Managers focus on the relative strength of one currency versus another, aka. foreign exchange rates. The strength of a currency is largely influenced by the country’s
interest rates and economic growth.
Equities S&P, Nasdaq, Nikkei Futures, Options & Swaps
Managers take either directional bets on a particular equity index or arbitrage positions among different indexes from the same country (S&P vs. Nasdaq) or different
countries (S&P vs. Nikkei).
Interest Rates Bonds, Bunds, JGBs Futures, Options & Swaps
Managers take either directional bets on a particular interest rate or arbitrage positions among different interest rates of the same country (10yr. vs. 30yr.) or different
countries (Bonds vs. Bunds).
Commodities Gold, Oil Futures, Options, Swaps & Forwards
Managers trade gold and oil for either profits or hedging purpose. Gold is the most liquid commodity traded against USD. Oil supply and demand is a crucial indicator of
global economic growth.

Overview (cont.)
42
Sharpe Ratio 1.47
Sortino Ratio 4.82
Leverage:
Derivatives have embedded leverage. Investors should focus on a
portfolio's margin-to-equity ratio instead of its total notional value.
1. active central banks
2. global economies in divergent cycles
1. low volatility
2. choppy, trendless markets
Advantages:
1. various investment opportunities
2. easy to understand and monitor
Disadvantages:
1. returns can be lumpy and volatile
2. prone to style drift
Notes:
1. Given the flexible nature of the strategy, one measure of style drift is to watch
the degree of realized volatility, the amount of risk the fund undertakes and key
personnel changes during the examined period.
2. It is uncharacteristic of a global macro fund to invest a significant portion of its
capital in individual stocks.

Global Macro – Discretionary (Thematic)
43
Discretionary (Thematic) is one of the earliest and most iconic strategies. It focuses on macroeconomic trends, monetary and fiscal policy, and the interaction between
geopolitics and economies (aka. geo-economics). A manager takes either directional bets on a particular asset class or arbitrage positions among different asset classes
(i.e. spread trades). Quantitative tools, such as econometrics, are often used to validate investment theses. Portfolio construction and market timing are the keys to a
manger’s success.
Popular Themes*
Economic Cycle
an economy goes through different stages – expansion,
peak, contraction and trough
Economic Policy
changes in fiscal and monetary policy, i.e. short-term
interest rates and tax rates
International Trades
shifts in import and export prospects led by foreign
exchange rates and trade relationships
Market Sentiment shifts in investors’ risk appetite – risk-on vs. risk-off
Notes
1. When conduct due diligence, one should focus on a portfolio’s concentration
level – while there can be several positions in a portfolio, they may all be
pertaining to the same theme, which leads to a high level of liquidity risk.
That being said, too many different themes can also lead to dilutive effects.
2. Despite the strategy’s flexible nature, a discretionary manager usually
develops themes and builds positions around a handful of markets, asset
classes and securities.
*Source: “A Half Century of Macro Momentum”, Jordan Brooks, MD, AQR

Global Macro – Discretionary (Thematic) (cont.)
44
2. market movements are driven by
macro factors and policy changes
1. low volatility
2. equity markets are rallying and
outperforming other asset classes
Advantages:
1. nimble and highly responsive to new
information
2. returns can be exceptionally high
Disadvantages:
1. investment opportunities can be
limited
2. exposure to key-man risk
1. How does the fund identify themes and screen investment opportunities?
2. What does the fund’s investment process look like?
3. Does the fund employ quantitative models and/or computer programs to
facilitate its investment research?
4. What kinds of themes has the fund focused on in the past? What are their
conviction rates?
6. What is the typical number of themes and positions in the portfolio? Does the
fund monitor their correlations?
Sharpe Ratio 0.41
Sortino Ratio 0.38

Global Macro – Systematic (Quantitative)
45
Popular Techniques
Trend-Following
It is a reactionary technique focusing on taking positions
in markets that have established trends.
Countertrend
It is a contrarian technique focusing on trend reversals
by taking long positions on overly bearish trends and
short positions on overly bullish trends.
Pattern Recognition
It identifies repeated, tradable price patterns that are
statistically significant in predicting the future direction of
a security or market.
Technical Indicators
It relies on various technical signals, such as RSI,
MACD, SMA, etc., to understand price momentum and
make investment decisions accordingly.
A Trading Model Development Process
Systematic (Quantitative) relies on various quantitative models and technical
analysis to identify trading opportunities across a great number of markets, asset
classes and securities that exhibit trending or momentum characteristics. Its holding
period tends to be much shorter than discretionary.
The entire investment process can be automated by computers, ranging from
monitoring markets and spotting trades to portfolio construction and market timing,
with little to no human intervention.
Investment Idea/Thesis
a written idea/thesis describing the investment
opportunities and process
Initial Review
discuss the idea/thesis with the risk management
and trade execution team
Model Construction
construct a model according to the idea/thesis to
generate buy/sell signals
Back-Testing
test the model with historical data to validate its
accuracy and effectiveness
Real-Time Testing
(Optional)
test the model with live data through paper-trading
and/or incubation
Implementation
green-light the launch of the model once it passes
all tests

Global Macro – Systematic (Quantitative) (cont.)
46
2. market movements are driven by
momentum rather than fundamentals
1. low volatility
2. trendless, sideways and crowded
markets
Advantages:
1. consistent and disciplined investment
process
2. invest in a wide array of markets and
asset classes
Disadvantages:
1. rigid and less responsive to market
changes
1. How many models does the fund currently manage? What types of models are
they (e.g. trend-following, countertrend, mean reversion, momentum)?
2. What does the model development process look like? What is the typical life
span of a model?
3. What kinds of tests have been done on a model before implementing it (e.g.
back-testing, real-time testing, stress testing)? Has a model been tested with
data that is different from the data utilized in developing it?
4. How often does the fund optimize its models? Who is responsible for
optimization?
5. How does the fund allocate its capital to each model?
Sharpe Ratio 1.13
Sortino Ratio 4.69

Overview
48
Managed Futures focuses on actively trading futures contracts of physical commodities, fixed income, stock indexes and currencies. In contrast to other strategies, a
manager tends to focus more on a security’s price behavior and pay little attention to its valuation (aka. intrinsic value). The main techniques are directional trading and
spread trading (i.e. intermarket spread, intra-market spread, and inter-exchange spread).
Source: “Are Managed Futures the Same as Hedge Funds?”, Morgan Stanley Investment Management, Ceres Managed Futures Team,
2017, https://www.morganstanley.com/im/publication/insights/investment-insights/ii_aremanagedfuturesthesameashedgefunds_us.pdf
Managed Futures vs. Global Macro
Managed Futures Global Macro
Styles
over 75% of the funds are
systematic
discretionary and systematic
are equally popular
Markets trade in nearly all markets
trade less in agriculture,
metals and energies
Research
focus on the price behavior
of markets and securities
focus on the interrelationship
of the world economy
Instruments mainly futures contracts
futures + OTC derivatives
(e.g. forwards & swaps)

Overview (cont.)
49
Leverage:
Derivatives have embedded leverage. Investors should focus on a
portfolio's margin-to-equity ratio instead of its total notional value.
2. performance divergence among
markets and securities
1. a flattening yield curve
2. sideways, trendless and crowded
markets
Advantages:
1. one of the most liquid strategies
3. highly transparent operations
Disadvantages:
1. lumpy and volatile performance
2. sector/market events can be difficult
to gauge (i.e. weather & geopolitics)
1. For discretionary, what are some of the themes the fund has traded in the past?
What are their conviction rates?
2. For systematic, how many models does the fund currently manage? How often
does the fund introduce new models? How quickly can these models be
replicated by competitors?
3. What is the fund’s expectation and experience with model degradation?
Sharpe Ratio 1.04
Sortino Ratio 2.15
Correlation w/ S&P500 -0.43

Managed Futures – Systematic
50
Systematic, by relying on various quantitative tools to analyze historical market data, aims to develop a trading process that is capable of identifying repeated and tradable
price trends and patterns. Many funds have employed computers to automate the entire process, which ranges from effectively identifying trading opportunities to
successfully executing trades, with little to no human intervention.
https://nilssonhedge.com/research-tools/managed-futures-an-introduction/
Trend-Following
Countertrend
Pattern Recognition
Automation Techniques
Systematic Managers Dominate the Strategy
Artificial Intelligence (“AI”) Algorithms (“Algos”)
Trading Techniques

51
Artificial Intelligence
(“AI”)
Through machine learning and deep learning, a fund creates an artificial being that is capable of monitoring markets, analyzing data and
making autonomous trading decisions. While the “manager” can be adaptive and quick to adjust its decision-making matrix in response to new
market information, without proper supervision, it can lead to unintended style drift.
Algorithms
(“Algos”)
Trading models are developed and translated into algorithms so that the process can be taken over and streamlined by computers. Unlike AI,
algos are step-by-step instructions a computer follows without deviation. While this technique has a high level of style consistency, it can be
slow in responding to market changes as any adjustments require human intervention.
Trend-Following
Trading decisions are made by identifying and
following market trends. It often generates lumpy
returns and does not perform well when a market is
trendless.
Countertrend
By relying on various technical indicators, trading
decisions are made when a market is deemed to be
either overbought or oversold and ready to reverse
from its current trend.
Pattern Recognition
A manager relies on various patterns to make trading
decisions. Some of the most well-known patterns are
flag, pennant, triangles, head-and-shoulder, double
tops/bottoms and gaps.
Source:
https://www.efficient.com/pdfs/Moving_Into_the_Mainstream_Liquid_CTA_Strateg
ies_and_Their_Role_in_Providing_Portfolio_Diversification.pdf
Source: https://www.liberatedstocktrader.com/course-103-technical-analysis/103-21-
continuation-patterns/
Source: https://trendfollowing.com
Managed Futures – Systematic (cont.)

Overview
53
Credit focuses on investing in various corporate debt instruments and expects to
generate a blended return from both coupon payments and capital appreciation.
**Source: Source: “Systematic Credit Investing”, April Frieda, CFA, Scott Richardson, Ph.D., AQR
The Link Between Yield and Credit Risk (aka. Default Risk)
Pure Credit Exposure, Bonds vs. Credit Default Swaps (CDS)**
Via Bonds
Long Corporate Bond
+
Short Treasury
Short Corporate Bond
+
Long Treasury
Via CDS
Long CDS
(Sell Protection)
Short CDS
(Buy Protection)
Corporate Bond Yield
Treasury Yield
100
Recovery
Spread
100-Recovery
regular cash flows when no default occurs
cash flows when default occurs
Changes in Credit Spreads Throughout the Economic Cycle
Narrowing Narrowing Narrowing Widening
Corporate Bond Cash Flows

Overview (cont.)
54
Directional Bets – A manager bets on improving or worsening credit by taking long
and short positions in corporate debt securities (i.e. cash bonds and Collateralized
Debt Obligations (CDOs)) and credit indexes. Credit Default Swaps (CDS) are used
to hedge against downside risk.
Paris-Trading – Similar to equity market neutral, a manager simultaneously longs
and shorts different credit securities issued by companies within the same industry or
sector and profits from the difference in price. Managers often trade CDS in lieu of
cash bonds.
highly volatile credit markets
high/rising interest rates
Advantages:
various investment opportunities
Disadvantages:
performance tends to be cyclical
1. Does the portfolio have a negative carry? How does the fund manage long and
short positions throughout the economic cycle?
2. Does the fund use credit indexes and/or options to hedge?
3. What is the liquidity like of the structured products in the portfolio?
Sharpe Ratio 0.76
Sortino Ratio 0.53

Credit – Mortgage-Backed Securities
55
Mortgage-Backed Securities (MBS) are pools of individual mortgage loans that are bundled together through securitization and sold to investors as securities (i.e. bonds)
with commonly a 15- or 30-year amortization schedule. As a pass-through security, MBS holders receive both coupon and principal payments. MBS are difficult to value
because a mortgage can be prepaid earlier than the predetermined deadline, refinanced at a different rate or defaulted on.
It values an MBS based on one or several different factors including assumed
future interest rates, discount rates, mortgage rates, credit ratings, etc.
Factor Analysis
It determines the cheapness of an MBS by analyzing its relationship with a
Treasury that has matching maturity. It calculates the average spread above
the yield curve of the Treasury. The higher the spread, the cheaper the MBS.
Option-Adjusted Spread (OAS)
They are designed to forecast a borrower's likelihood of either refinancing
his/her mortgage or defaulting on his/her payments. These models are often
employed in conjunction with econometric models and scenario analysis.
Prepayment, Default & Recovery Models
Popular MBS Pricing/Valuation Models
Source: https://www.raymondjames.com/wealth-management/advice-products-and-services/investment-solutions/fixed-
income/taxable-bonds/mbs-and-cmos

Credit – Mortgage-Backed Securities (cont.)
56
Popular Styles
Directional Bets
A manager makes buy/sell decisions by employing various valuation models to
analyze the cash flow and refinancing abilities of an MBS. These positions are
often substantially leveraged and can last between one day to several months.
Arbitrage
A manager takes a long position on an MBS with the highest option-adjusted
spread (OAS) and a short position on a Treasury (futures contracts instead of
cash bonds). Leverage is often employed to enhance performance.
Leverage*: Typical: 4.3x Maximum: 10x Range: 3.9 – 10x
Advantages:
Disadvantages:
1. exposure to prepayment & credit
risk
2. complex and difficult to evaluate
1. What does the fund’s investment process look like?
2. Does the fund employ quantitative models and/or computer programs to
facilitate its investment research?
3. How does the fund determine the size of a position? What kinds of effects
does rising/declining NAV have on position sizing?
4. How does the fund monitor and manage risks, especially prepayment risk?
5. Does the fund develop its own model(s) to price and value MBS? If yes, who
is responsible for developing and monitoring the model(s)? Does the fund
optimize its model(s)?

Developed Markets Emerging Markets
Growth Potential Low High
Diversification Low High
Replicability High Low
Portfolio Correlation High Low
Political Risk Low High
Currency Risk Low High
Liquidity High Low
Corporate Governance High Low
Overview
58
Source: HFR Emerging Markets (total) Index, https://www.hfr.com/indices/hfri-emerging-markets-total-index;
MSCI Emerging Markets Index, https://www.msci.com/documents/10199/c0db0a48-01f2-4ba9-ad01-226fd5678111
Source: “Which Emerging-Market Hedge Funds Perform Best?”, Tom Yuz, Apr 20, 2018, https://medium.com/@tomyuz/which-
emerging-market-hedge-funds-perform-best-c12f97d7ed16
Sharpe Ratio 0.79
Sortino Ratio 0.76
Regions Countries
Africa: Egypt, South Africa
Asia ex-Japan:
China, India, Indonesia, Korea, Malaysia, Pakistan,
Philippines, Taiwan, Thailand
Latin America: Argentina, Brazil, Chile, Colombia, Mexico, Peru
the Middle East: Qatar, Turkey, United Arab Emirates
Eastern Europe: Russia, Greece, Czech Republic, Hungary, Poland

Emerging Markets – Equity
59
Features:
1. managers tend to focus mainly on
growth stocks
2. managers are specialists in one or
two specific countries/regions
3. portfolio tends to be long-biased with
a long-term focus
4. investments are made directly in local
markets or via ADRs
Advantages:
1. cheap valuations
2. potential for strong growth
Disadvantages:
1. limited/less transparent information
2. exposure to currency risk
1. Which country/region does the fund focus on? If the fund focuses on more than
one region, how does the fund allocate its research time (in %) to each region?
3. How does the fund manage its short positions, especially in countries where
short selling is difficult (e.g. China)?
4. How does the fund manage currency risk?
5. How does the fund manage country/region specific risk?
Sharpe Ratio 0.85
Sortino Ratio 1.35

Emerging Markets – Debt
60
EM Debt is designed to profit from high-yield bonds offered by less developed countries. There are local currency debt and hard currency debt (e.g. USD denominated
debt). To manage currency risk, a manager can either actively adjust the portfolio’s exposure to local and hard currency debt or use derivatives, such as futures and swaps,
to hedge against it.
Local Currency*
Sovereign Debt
EM governments issue bonds in local
currencies.
This is the largest and most liquid EM
debt sector. It is considered safer than
hard currency sovereign debt and
uncorrelated with the interest rate cycle
of developed markets.
Corporate Debt
EM corporations issue bonds in local
currencies.
Depending on the manager, currency
exposure can be either hedged or not.
It offers exposure to different parts of
the credit cycle but can be volatile and
difficult to value.
It profits from capital appreciation and the rise/fall of exchange rates (if currency
exposure is unhedged).
Hard Currency**
Sovereign Debt
EM governments issue bonds in USD,
Euro or Yen.
It is less volatile than local currency
sovereign debt due to the lack of
currency exposure. Its credit rating is
understandably low given its EM status,
so is the liquidity.
Corporate Debt*
EM corporations issue bonds in USD,
Euro or Yen.
This is the fastest growing EM debt
sector. It can have a higher credit rating
than the issuing company’s country but
is exposed to interest rate risk, credit
risk and liquidity risk.
It profits from either the spread above US Treasurys or capital appreciation led by
spread compression.
*Source: “Emerging Market Debt, to hedge or not to hedge”, Schroders, https://www.schroders.com/en/au/institutions/insights/the-fix/emerging-market-debt-to-hedge-or-not-to-hedge/
**Source: “Emerging Market Bond Traders Embrace E-Trading”, Greenwich Associates, https://www.marketaxess.com/sites/default/files/2018-11/Emerging-Market-Bond-Traders-Embrace-E-Trading-2018_0.pdf

Emerging Markets – Debt (cont.)
61
Features:
1. investment horizon is mostly short- to
mid-term
2. employ a mix of top-down and
bottom-up research approaches
3. investment style can be fundamental,
quantitative, or a combination of both
4. CDS are employed to hedge against
credit risk
Advantages:
1. growing investment opportunities
2. biased ratings lead to cheap
valuations
Disadvantages:
1. limited/less transparent information
2. performance tends to be highly
volatile
1. Which country/region does the fund focus on? If the fund focuses on more than
one region, how does the fund allocate its research time (in %) to each region?
2. How does the fund manage its currency exposure?
3. What is the fund’s investment approach – L/S, long only, or arbitrage?
4. Does the portfolio have a negative carry?
5. How does the fund manage country/region specific risk?
Sharpe Ratio 1.27
Sortino Ratio 1.89

62
• 40 Different Types Of Arbitrage Trading Strategies: FPI. FinancePlusInsurance. (2020, May 23). https://financeplusinsurance.com/different-types-arbitrage-trading-strategies/#Capital_Structure_Arbitrage
• Absolute return: Seeking positive returns independent of the market direction. INVESCO investmentcampus. (n.d.). https://invesco.eu/investment-campus/educational-papers/absolute-return
• The activist revolution Understanding and navigating a new world of heightened investor scrutiny. Corporate Finance Advisory and Mergers & Acquisitions. (2015).
https://www.jpmorgan.com/content/dam/jpm/corporate/investment-bank/cfa/pub/Understanding_and_Navigating_a_New_World_of_Heightened_Investor_Scrutiny.pdf
• AIMA Investor Education: Hedge Funds 101. AIMA. (2019, April). https://www.aima.org/static/b961a28e-bab4-4be8-b44589db76845ac7/AIMA-Investor-Education-Hedge-Funds-101.pdf
• Aima. (2006). Long/Short Equity Strategy. aima Canada strategy paper series.
• aima. (2014). Unlocking Value - The Role of Activist Alternative Investment Managers. AIMA, Simmons &Simmons.
• Alessie, T. I. (2004, November). OVERVIEW OF HEDGE FUND CATEGORIES HOW DO THEY GENERATE PERFORMANCE. FUNDANA Fundamentally different. https://www.fundana.ch/wp-
content/uploads/LeuWorkshop0411.pdf
• Are Managed Futures the Same as Hedge Funds? Morgan Stanley Investment Management. (2017). https://www.morganstanley.com/im/publication/insights/investment-
insights/ii_aremanagedfuturesthesameashedgefunds_us.pdf
• Asness, C., Berger, A., & Palazzolo, C. (2009). The Limits of Convertible Bond Arbitrage. AQR Capital Management, LLC.
• Bakrania, P., Doheny, C., Fader, J., & Heinrichs, C. (2018). Fundamental Trends and Dislocated Markets An Integrated Approach to Global Macro. AQR Capital Management, LLC.
• Best Practices in Hedge Fund Investing: Due Diligence for Fixed Income and Credit Strategies. The Greenwich Roundtable. (2007). https://greenwichroundtable.org/system/files/BP-2007.pdf
• BHADURI, R. A. N. J. A. N., & FLORES, E. L. I. Z. A. B. E. T. H. (2014, June). A Quantitative Analysis of Managed Futures Strategies. CME Group.
https://www.cmegroup.com/education/files/Lintner_Revisited_Quantitative_Analysis.pdf
• Bolder, D. J. (2015). Fixed-income portfolio analytics: a practical guide to implementing, monitoring and understanding fixed-income portfolios. Springer.
• Boyarchenko, N., Gupta, P., Steele, N., & Yen, J. (2018, October). Trends in Credit Basis Spreads. Federal Reserve Bank of New York Economic Policy.
https://www.newyorkfed.org/medialibrary/media/research/epr/2018/epr_2018_trends-in-credit-basis-spreads_boyarchenko.pdf
• Bratton, W. W., & McCahery, J. (2015). Institutional investor activism: hedge funds and private equity, economics and regulation. Oxford University Press.
• Brightman, C., & Shepherd, S. (2016). Systematic Global Macro. Research Affiliates.
• Bulaki, S. (2021, March 22). Hedge Fund Strategy. eFinanceManagement. https://efinancemanagement.com/investment-decisions/hedge-fund-strategy
Reference – 1

63
• Calamos, N. P. (2003). Convertible Arbitrage: Insights and Techniques for Successful Hedging. John Wiley & Sons.
• Capocci, D. (2013). Complete Guide to Hedge Funds and Hedge Fund Strategies. Springer Nature.
• Casa, T. D., Rechsteiner, M., & Lehmann, A. (2008, April). Capturing the unique value created by corporate and economic turnarounds. Hedge fund investing in distressed securities.
• CASSELL, M. A. R. T. I. N., PROBST, J. E. F. F., SLOAN, G. A. R. R. E. T., & WILLIAMS, T. H. O. M. A. S. (2015, September 2). THE PUBLIC INVESTMENT PORTFOLIO: UNDERSTANDING
STRUCTURED POOLED SECURITIES – ASSET-BACKED, MORTGAGE-BACKED AND COLLATERALIZED MORTGAGE SECURITIES. California Debt and Investment Advisory Comission.
https://www.treasurer.ca.gov/cdiac/webinars/2015/portfolio/presentations/20150902.pdf
• Caulfield, J. (2018). Be your own activist Developing an activist mindset. Deloitte LLP. https://www2.deloitte.com/content/dam/Deloitte/za/Documents/finance/za_Activist_Investors_report.pdf
• Cherif, K., & Weidlich, G. (2017, May). Hedge funds Exploring the benefits of equity event-driven strategies – update. UBS.
https://www.ubs.com/content/dam/WealthManagementAmericas/documents/event-driven-strategies.pdf
• Choudhry, M., Moskovic, D., Y., W. M. C., & Baig, S. (2014). Fixed income markets: management, trading and hedging. Wiley.
• Commodity Trading Strategies. Karvy Comtrade Limited. (n.d.). http://www.karvycommodities.com/downloads/karvyspecialreports/karvysspecialreports_201105281098.pdf
• Comparing CTA Strategies - CME Group. Futures & Options Trading for Risk Management - CME Group. (n.d.). https://www.cmegroup.com/education/courses/managed-futures/comparing-cta-
strategies.html
• Coursen, D., Goss, E., & Kedzior, J. (2020, September 23). Alternative investment toolbox: Hedge funds: Explore Our Thinking. Plante Moran. https://www.plantemoran.com/explore-our-
thinking/insight/2020/09/alternative-investment-toolbox-hedge-funds
• Credit Derivatives: Meaning, Types, Products, Risks & Benefits. EduPristine. (2018, October 11). https://www.edupristine.com/blog/credit-derivatives-in-detail
• Crystal Capital Partners. (2017). Hedge Fund Strategies Explained. Hedge Fund Strategies Explained | Crystal Capital Partners. https://www.crystalfunds.com/insights/hedge-funds-explained
• Currie, A., & Morris, J. (2002, December). And now for capital structure arbitrage. http://www.amafi.fr/download/pages/KstS8VJJKoro95B3iQWbiGB9TXFEMavyg4VjlpRg.pdf
• DER ZWAN, M. A. R. K. V. A. N., & RAFTER, R. O. B. E. R. T. (2018). Global Macro–Why Now? Morgan Stanley Investment Management .
https://www.morganstanley.com/im/publication/insights/investment-insights/ii_globalmacrowhynow_us.pdf
• Doug Coursen Wealth Management Erin Goss Wealth Management Jeremy Kedzior Wealth Management, Coursen, D., Goss, E., & Kedzior, J. (2020, September 23). Alternative investment toolbox:
Hedge funds: Explore Our Thinking. Plante Moran. https://www.plantemoran.com/explore-our-thinking/insight/2020/09/alternative-investment-toolbox-hedge-funds
Reference – 2

64
• Fabozzi, F. J., & Mann, S. V. (2021). The handbook of fixed income securities. McGraw-Hill.
• Feghali, G., & Vilalon, D. (2014). Building a Better Equity Market Neutral Strategy. AQR Capital Management, LLC.
• Fixed Income Arbitrage – Hedge Funds. Hedge Fund Strategies Key insights into the industry. (2020, April 17). https://myeconomicspage.wordpress.com/fixed-income-arbitrage-hedge-funds/
• Ford, R. (2012, November 2). What Are the Most Liquid Hedge Fund Strategies? Preqin. https://www.preqin.com/insights/research/blogs/what-are-the-most-liquid-hedge-fund-strategies
• Frieda, A., & Richardson, S. (2016). Systematic Credit Investing. AQR Capital Management, LLC.
• Fund Interview: Lynx Arbitrage Volatility Arbitrage Fund. Fund Interview | Lynx Arbitrage Volatility Arbitrage Fund. (n.d.). https://www.eurekahedge.com/NewsAndEvents/News/1067/Hedge-Fund-
Interview-Lynx-Arbitrage-Volatility-Arbitrage-Fund
• Fundamental vs. Quantitative Investing: Same Goal, Different Process. American Century Investments? (2020, September 18). https://www.americancentury.com/content/direct/en/insights/guidance-
planning/general-investing/general-investing-insights/fundamental-vs-quantitative.html
• Gabelli, M. (2018). Merger Masters: Tales of Arbitrage. Columbia University Press.
• Garner, C., & Brittain, P. (2009). Commodity options trading and hedging volatility in the world's most lucrative market. FT Press.
• Ghalitschi, K. (2015, March). MANAGED FUTURES / CTA What a Difference a Year makes! - A Case Paper. Hedge Nordic. http://hedgenordic.com/wp-
content/uploads/2015/10/Hedgenordic_CTA_Report_2015_low.pdf
• Gimple , D., & Song, H. (2020, August 17). Benefits of Investing in Mortgage-Backed Securities. Diamond Hill Capital Management. https://www.diamond-hill.com/insights/a-124/benefits-of-investing-in-
mortgage-backed-securities.fs
• Graham, B. (n.d.). Security Analysis ( 1951 edition). Special Situation Investing.
• Greenblatt, J. (1999). You can be a stock market genius: (even if you're not too smart): uncover the secret hiding places of stock market profits. Fireside.
• Guide to Alternatives. J.P.Morgan Asset Management. (2021, May 31). https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/insights/market-insights/guide-to-alternatives/mi-guide-to-
alternatives.pdf
• Hedge Fund Education Series Part 4: Important Hedge Fund Strategies. UBS Alternative Investments. (2011, February 22).
https://www.activeallocator.com/static/pdf/important%20hedge%20fund%20strategies.pdf
• Hedges, J. (2005). Hedges on hedge funds: how to successfully analyze and select an investment. Wiley.
Reference – 3

65
• HFR Hedge Fund Strategy Definitions - Relative Value. HFR Hedge Fund Strategy Definitions - Relative Value | Hedge Fund Research®. (n.d.). https://www.hfr.com/hfr-hedge-fund-strategy-definitions-
relative-value
• Hill, J., & Donohue, D. (2015, November 20). Gamma Trading: Why Big Market Swings Can Be Good News. Calamos Investments. https://www.calamos.com/blogs/voices/2015-11-20-jh-do-gamma-
trading/
• Inglis, J., & Kehoe, T. (n.d.). Trustee Series Paper 4: Efficient Flows understanding liquidity in alternative investment funds . AIMA & CAIA Association Paper.
https://www.aima.org/static/uploaded/7656e745-4db1-4bf9-a09924216e53225c.pdf
• Investing in Special Situations. Fundamental Finance Playbook. (2021, January 7). https://fundamentalfinanceplaybook.com/investing-in-special-situations/
• Jaffarian, E. (2007, June). a Survey of the Managed Futures Industry. Efficient Capital Management. https://www.efficient.com/pdfs/ASurveyOfTheManagedFuturesIndustry_SecondEdition.pdf
• Javaheri, A. (2005). Inside volatility arbitrage: the secrets of skewness. John Wiley & Sons.
• Kaleel, M. (2019, November 14). Benefits of bond carry - Janus Henderson Investors. Janus Henderson Investors. https://www.janushenderson.com/en-gb/adviser/article/benefits-of-bond-carry/
• Kamunya, A. N. (n.d.). DEMYSTIFYING SYSTEMATIC MACRO HEDGE FUND STRATEGIES . NEPC.
https://cdn2.hubspot.net/hubfs/2529352/Blog/2014_10_nepc_demystifying_systematic_macro_hedge_fund_strategies.pdf?t=1486746354842
• Kirchner, T. (2016). Merger arbitrage: how to profit from global event-driven arbitrage. Wiley.
• Lam, G. (2014, June). INTRODUCTION TO HEDGE FUND STRATEGIES. http://www.complianceplus.hk/wp-content/uploads/2014/07/Hedges-Funds-Different-Strategies_v4.pdf
• Lamm, M. F. (2004, August). The Role of Long/Short Equity Hedge Funds in Investment Portfolios. DB Absolute Return Strategies. https://www.trendfollowing.com/whitepaper/long_short.pdf
• Lovell, H., & Reeves, C. (n.d.). Long/Short Credit Strategy. · The Hedge Fund Journal. https://thehedgefundjournal.com/long-short-credit-strategy/
• Lungarella, G. (2019, November 7). Managed Futures: A Real Alternative. Capital Trading Group. https://capitaltradinggroup.com/managed-futures/
• Mader, W. (2005, July). Hedge Funds Alternative Investment Strategies and Portfolio Models. https://opus.bibliothek.uni-
augsburg.de/opus4/frontdoor/deliver/index/docId/569/file/Mader_Hedge_Funds.pdf
• Manage Hedging in Emerging Market Debt - Institutions - Schroders. Emerging Market Debt - To hedge or not to hedge? (2021, July 4). https://www.schroders.com/en/au/institutions/insights/the-
fix/emerging-market-debt-to-hedge-or-not-to-hedge/
• Market-Neutral Strategies An All-Weather Investment Option. Alliance Bernstein. (2012).
https://www.alliancebernstein.com/CmsObjectABD/PDF/Research_WhitePaper/MarketNeutralWhitepaper06.08.12.pdf
Reference – 4

66
• Mazzoli, S. (n.d.). Hedge Fund Strategies. BSFS Finance Society.
https://static1.squarespace.com/static/55f823dde4b03fd1bd687c38/t/56ca1e7e07eaa0772e174870/1456086659664/HFs+Strategies+vF.pdf
• McCann, B. (2014). Tactical portfolios: strategies and tactics for investing in hedge funds and liquid alternatives. John Wiley & Sons.
• McPartland, K. (2018). Emerging Market Bond Traders Embrace E-Trading. Greenwich Associates. https://www.marketaxess.com/sites/default/files/2018-11/Emerging-Market-Bond-Traders-Embrace-E-
Trading-2018_0.pdf
• Moheyeldin, M. (2014, March). Forwards & Futures. Central Bank of Egypt. https://cmi.comesa.int/wp-content/uploads/2016/03/Treasury-Bond-Futures.pdf
• Mortgage Backed Securities Arbitrage. Hedge Fund Strategies. (2020, May 16). https://myeconomicspage.wordpress.com/mortgage-backed-securities-arbitrage/
• Moyer, S. G. (2005). Distressed debt analysis: strategies for speculative investors. J. Ross Publishing.
• Nelken, I. (2006). Hedge fund investment management. Elsevier.
• Niall Paul. TT international. (n.d.). https://www.ttint.com/what-we-do/global-emerging-markets/
• NilssonHedge A Free Managed Futures & Hedge Fund Database Managed Futures – An introduction. NilssonHedge. (2021, May 7). https://nilssonhedge.com/research-tools/managed-futures-an-
introduction/
• Pancholi, D. (2012, May). INVESTING IN ACTIVIST HEDGE FUND STRATEGIES AN OPPORTUNE TIME. NEPC.
https://cdn2.hubspot.net/hubfs/2529352/files/2012_05_nepc_investing_in_activist_hedge_fund_strategies.pdf
• Preqin Special Report: Hedge Funds. Preqin Research. (2012, October). https://docs.preqin.com/reports/Preqin_Special_Report_Hedge_Funds_October_2012.pdf
• A Prime Finance Business Advisory Services . (2012, June). Moving Into the Mainstream: Liquid CTA/Macro Strategies & Their Role in Providing Portfolio Diversification. Citi Prime Finance Futures and
OTC Clearing. https://www.efficient.com/pdfs/Moving_Into_the_Mainstream_Liquid_CTA_Strategies_and_Their_Role_in_Providing_Portfolio_Diversification.pdf
• A Primer on Interest Rate Markets and Relative Value – Part 1: Yield Curve Opportunities and Risks. Ardea Investment Management Pty Limited. (2020). https://www.ardea.com.au/wp-
content/uploads/ARDE-202101_Rates-Market-Primer-_fin.pdf
• Puccio, R. (2010, September 30). Global Macro & Managed Futures Strategies: Flexibility & Profitability in times of turmoil. Pioneer Alternative Investments.
http://www.mondohedge.com/uploads/Pioneer.pdf
• Rabener, N. (2020, October 22). Does carry trading work? The Evidence-Based Investor. https://www.evidenceinvestor.com/does-carry-trading-work/
• Roberts, S. (2016, January). An Introduction to Global Carry. Campbell White Paper Series. https://www.cmegroup.com/education/files/an-introduction-to-global-carry.pdf
Reference – 5

67
• Ross, L. (2014, June). https://russellinvestments.com/-/media/files/us/insights/institutions/alternatives/relative-value-investment-strategies.pdf?la=en. Russell Investments. https://russellinvestments.com/-
/media/files/us/insights/institutions/alternatives/relative-value-investment-strategies.pdf?la=en
• Russell, J. (2020, November 28). Carry Trading Is One of the Simple Strategies for FX Trading. The Balance. https://www.thebalance.com/introduction-to-carry-trading-1344843
• Saltwell, H. (2021, May 4). Hedge fund strategy definitions. Aurum. https://www.aurum.com/hedge-fund-strategy-definitions/
• Schiller, M. (1966). Investors' guide to special situations in the stock market. American Research Council.
• Shareholder Advisory Group. (2020). Review of Shareholder Activism – Q3 2020. L A Z A R D ' S H A R E H O L D E R A D V I S O R Y G R O U P. https://www.lazard.com/media/451406/lazards-q3-
2020-review-of-shareholder-activism.pdf
• Smigel, L. (2021, March 23). Volatility Arbitrage: Overview & Concerns. Analyzing Alpha. https://analyzingalpha.com/volatility-arbitrage
• Stefanini, F. (2012). Investment strategies of hedge funds. Wiley.
• Studios, P. (n.d.). Convertible Bonds: An Underappreciated Source of Alpha. Osterweis Capital Management. https://www.osterweis.com/insights/convertibles
• Tidmore, C., & Berkowitz, D. B. (2019, July). https://institutional.vanguard.com/iam/pdf/ISGCLAHF.pdf. Vanguard. https://institutional.vanguard.com/iam/pdf/ISGCLAHF.pdf
• Till, H. (n.d.). Commodity Trading Strategies, Common Mistakes, and Famous Debacles. Solich Scholar, J.P. Morgan Center for Commodities, University of Colorado Denver. http://www.jpmcc-
gcard.com/wp-content/uploads/2018/01/Till-Oxford-June-2017-051717.pdf
• Tretina, K. (2021, June 25). How Do You Invest In Hedge Funds? Forbes. https://www.forbes.com/sites/investopedia/2013/11/22/the-multiple-strategies-of-hedge-funds/?sh=1402d56c18df
• Understanding mortgage-backed securities. MBS and CMOs - Fixed Income | Raymond James. (n.d.). https://www.raymondjames.com/wealth-management/advice-products-and-services/investment-
solutions/fixed-income/taxable-bonds/mbs-and-cmos
• Volatility Arbitrage - Overview, How it Works, and Concerns. Corporate Finance Institute. (2020, April 3). https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/volatility-arbitrage/
• Warsager, R., & Duncan, R. (2004). A Comparison of Two Hedge Fund Strategies: Cta and Global Macro. AIMA Journal.
• What Are the Specificities of Due Diligence Questionnaires When Applied to Alternative Investment Funds? Diligend. (2020, April 22). https://www.diligend.com/what-are-the-specificities-of-due-diligence-
questionnaires-when-applied-to-alternative-investment-funds/
• WHAT IS AN “EVENT DRIVEN” HEDGE STRATEGY?Alternative Intelligence for Individual Investors. Franklin Templeton Distributors, Inc. (2020, December).
• Diamond Hill Capital Management. (n.d.). Sponsor Insights: Benefits of Investing in Mortgage-Backed Securities. Financial Advisor. https://www.fa-mag.com/news/sponsor-insights---benefits-of-investing-
in-mortgage-backed-securities-57954.html?section=205
Reference – 6

Hedge Fund Strategy Due Diligence

Hedge Fund Strategy Due Diligence

Recommandé

Recommandé

Contenu connexe

Tendances

Tendances (20)

Similaire à Hedge Fund Strategy Due Diligence

Similaire à Hedge Fund Strategy Due Diligence (20)

Dernier

Dernier (20)

Hedge Fund Strategy Due Diligence