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Equity hedge


Equity hedge funds represent the largest style segment in terms of assets under management of the hedge fund industry. This is due to the range of profit opportunities that divergences in the performance of different stocks and sectors present, both in developed and emerging markets around the world. Equity hedge funds aim to profit by taking long and short positions in equities that are deemed to be respectively under/overvalued, while neutralising some of the associated market risk.

Strategies may be driven by a focus on growth or value stocks, specific regions or industry sectors.



Illust.: Equity hedge


Equity hedge managers

Equity hedge managers have the ability to produce returns which demonstrate high participation in the upside potential of stock markets and protect capital/minimise drawdowns when equity markets are doing poorly. As such, equity hedge managers aim to provide performance that is comparable to that of traditional equity disciplines but with a more consistent return profile and less downside risk.

Performance is primarily driven by the skill and conviction of a manager. In particular, short selling is a specialist skill which enables managers to capitalise on the negative aspects of events such as earnings announcements, regulatory changes, mergers and corporate events.


Sub-strategies

The depth and size of global equity markets has created a broad range of sub-strategies within equity hedge that often specialise in specific market sectors, for example, emerging markets or technology, a geographical region or in small, medium or large cap stocks.



Illust.: Equity Hedge – Sub-strategies

As with any investment, funds can lose money as well as profit. Investors should always seek professional advice before considering any investment.

Please note some of these investment solutions and/or strategies may not be offered in your jurisdiction or may significantly differ from those offered in your jurisdiction.

Equity hedge
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