Alternative investment strategies, hedge funds? Well, first, let's talk about what exactly a hedge fund is.

Well, a hedge fund is a fund structure that can invest in really any asset class that it chooses.

Hedge fund managers are less restricted than traditional investment managers, and they have the flexibility to invest anywhere they see an opportunity.

Most hedge funds do have a broadly stated strategy, but are allowed some deviation from that strategy when they feel market conditions dictated.

In addition to being able to invest in any asset class, they can also utilize any strategy that they see fit, and therefore they utilize return enhancing strategies with the goal of generating higher returns, either in an absolute sense or over a specific market benchmark.

Some examples include leverage borrowing money to increase exposure, taking short positions, and using derivatives.

Now, it's important to note that the word hedge fund is somewhat of a misnomer.

Most funds aren't actually hedged.

The name dates back to when hedge funds were initially born when they were truly hedged, but that's no longer the case.

Digging deeper into the types of hedge funds, hedge funds are typically classified by strategy, although these classifications are gonna vary from source to source.

But many classifying organizations focus on the most common strategies, uh, while others may base it upon the underlying investment like equities or fixed income, et cetera.

But nonetheless, classifying funds is important so that investors can review aggregate performance data, select strategies to build a portfolio and to do appropriate performance, attribution, or evaluation as classified by many market participants.

Hedge funds fall into four broad categories, event driven relative value equity, hedge or macro funds starting with event driven.

These strategies seek to profit from short term events, typically involving a corporate structure or action, like an acquisition or a restructuring.

And some examples are merger arbitrage funds, distressed funds, activist funds, and special situation funds.

Next, relative value funds here, they seek to profit from a pricing discrepancy between related securities.

It can be fixed income, convertible arbitrage, fixed income asset, back volatility fund, or a multi-strategy fund.

Next equity hedge funds.

Now equity hedge strategies can be thought as the original hedge fund. Really, they are focused on public equity markets and take long and short positions in equity and in equity derivatives. Some Hedge funds called equity only funds invest exclusively in common equities.

Equity hedge funds include market neutral funds, fundamental growth and value funds, quant funds, or quantitative oriented funds, and short bias funds.

And lastly, macro funds.

And, and these funds really are any fund that emphasize a top down approach to identify economic trends evolving across the world.

And they trade based upon expected movements in these economic variables.

Now, these funds can trade opportunistically and fixed income and equity and currency in commodities or all of the above, and they'll use long and short positions in any of these asset classes to potentially profit from a view on an overall market direction, as influenced by major economic trends and or events.

Historically, the hedge fund space was dominated by the equity hedge category and the macro category.

However, currently with the rise of event driven and relative value funds, the split is pretty equal across the four.

And here we have a look at the world's biggest hedge funds.

On top, we have Bridgewater Associates that over a hundred billion dollars in assets headed of course by Ray Dalio.

And at the bottom of this list you'll see BlackRock, which is probably most well known for the management of traditional assets.

But as you can see, they have a large presence in alternatives Also.