Further strategies used within hedge funds include global macro. The assets that a global macro fund may invest in vary dramatically, and the fund may include very many different types of investments. This strategy attempts to pick investments based on the macro economic conditions of various countries. This strategy may also include both long and short positions in many assets, including currency, commodities, and futures, as well as equity and fixed income.
Dedicated short bias. Dedicated short bias is a strategy that maintains a net short exposure to the market through a combination of short and long positions.
Managed futures. Managed futures describes a strategy whereby a portfolio manager assembles a diversified portfolio of futures contracts rather than trading the underlying assets directly. This increases leverage since the initial margin payments for futures are lower than the market value of the position entered into, meaning that much greater exposure can be achieved, for the same initial outlay of cash.
Multi-strategy, a multi-strategy fund engages in a variety of investment strategies, the scope of which will be determined by each individual hedge fund. The ability to follow a wide range of strategies and to move between strategies based on market conditions provides the manager with a diversification benefit, which helps to smooth returns, reduce volatility, and decrease asset costs and single strategy risks.
Directional, directional funds are hedge funds that don't hedge, at least not fully. Managers of directional funds maintain some exposure to the market, but they try to get higher than expected returns for the amount of risk that they take. Volatility, instead of trading directly on the stock price or future price and trying to predict the market direction, the volatility trading strategies seek to gauge how much volatility there will be in the stock price over time, regardless of the current trends and price action. This strategy involves the extensive use of options since volatility is one of the factors that is used to determine the value of options.
Emerging markets, this type of strategy typically involves long investments in emerging market sectors and nations.
