Hedge FundsLocked: included in All Access

What hedge funds are and how they differ from mutual funds, ETFs and private equity; the five strategy families (equity hedge, event driven, relative value, opportunistic and multi-manager); the direct and indirect ways to invest (limited partnerships, master-feeder funds, side letters, SMAs, funds of one, funds of funds and replication ETFs); and where hedge fund returns, risks and diversification benefits really come from, including the biases in hedge fund indexes.

1. 1. What makes a hedge fund differentA hedge fund is a lightly regulated private pool that is defined by how it invests (leverage, short selling, derivatives, concentrated bets) rather than by what it owns, and it pays for that freedom with lockups, gates, high fees and less transparency.Locked: included in All Access13 min
2. 2. Strategy families and equity hedge strategiesHedge funds are grouped into five strategy families, and the oldest, equity hedge, buys shares it thinks are cheap and shorts those it thinks are dear, with the net market exposure ranging from long biased to zero to net short.Locked: included in All Access14 min
3. 3. Event-driven strategiesEvent-driven funds bet on corporate events (mergers, bankruptcies, spin-offs, shareholder campaigns) that should change a company's value, earning a spread or recovery if the event plays out and taking a sharp loss if it does not.Locked: included in All Access13 min
4. 4. Relative value and opportunistic strategiesRelative value funds bet that a temporary price gap between related securities will close, while opportunistic funds (global macro and managed futures) take directional, top-down positions across whole markets.Locked: included in All Access14 min
5. 5. Investing directly: partnerships, master-feeders, side letters and SMAsMost hedge funds are limited partnerships run by a general partner, often wrapped in a tax-efficient master-feeder structure, with terms set by the offering documents and tailored by side letters; large investors can instead get a fund of one or a separately managed account.Locked: included in All Access14 min
6. 6. Investing indirectly: funds of funds and replication ETFsSmaller investors reach hedge funds indirectly, through funds of hedge funds that add diversification, access and liquidity at the cost of a second layer of fees, or through liquid ETFs that imitate hedge fund returns without holding hedge funds.Locked: included in All Access12 min
7. 7. Where hedge fund returns come from, and why indexes flatter themHedge funds try to earn idiosyncratic alpha rather than market beta, so their return splits into market beta, strategy beta and alpha, but fees eat much of the alpha and self-reported hedge fund indexes overstate what investors actually earn.Locked: included in All Access13 min
8. 8. Risk, return and diversification in a portfolioOver long periods hedge funds have delivered equity-like gross returns with bond-like volatility and only moderate equity correlation, so adding them to a stock-bond portfolio has usually lowered risk and raised the Sharpe ratio, but that benefit varies over time and by strategy.Locked: included in All Access13 min