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Relative value


The sub strategies of relative value managers are divided by which securities they take simultaneous long and short positions in, for example, convertible bonds, stocks, bonds, credit instruments or derivatives. Multi-strategy relative value managers trade a combination of the other styles. 


Relative value spread trade

The underlying principle for all relative value strategies is spread trading. By establishing long positions in undervalued assets and short positions in overvalued assets, relative value managers aim to capture profit opportunities that arise from the changing price relationship between the securities concerned.



Illust.: Relative value – spread trading



Relative value trading involves the use of such instruments as convertible bonds, preferred securities, options, warrants and option-linked securities, sovereign bonds, swap contracts, swaptions, forward contracts, and futures contracts.


Sub-strategies

Relative value strategies aim for consistent performance in a variety of market conditions and offer the benefit of low correlation to traditional equity and bond markets.


Illust.: Relative value – 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.

Relative value
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