Multi Strategy Hedge Fund

Multi Strategy Hedge Funds

Multi Strategy Hedge Funds

Multi strategy hedge funds use several strategies within the same pool of assets. They might seek returns from running money focused on shorting equities, investing in global real estate projects, and seeking momentum focused event driven strategies. The diversification benefits help to smooth returns, reduce volatility and decrease asset-class and single-strategy risks. These funds may allocate funds in to a certain strategy in response to market trends allowing them to more easily capitalize on favorable market conditions. Due to the unpredictable nature of this type of hedge fund, the volatility is variable. A downside to this form of investing is that they will rarely be the highest performing hedge fund over a short time period. This is because the diversification dilutes the returns of any highly profitable strategy. The long term consistency, however, generally outweighs this risk.

I haven't seen this type of fund very often as only the largest funds will have the resources to effectively employ the strategy. Many people wanting hedge fund exposure to this type of strategy diversification will buy a fund of hedge fund product.

Here is a Comparison Between Hedge Fund of Funds and Multi-Strategy Hedge Funds.

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- Richard

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