Investment Strategies

  • Arbitrage: Simultaneous buying and selling of securities or other financial instruments to profit from often minute variances in prices. Some examples:
  • Convertible Arbitrage: Long on convertible securities (usually preferred shares or bonds) that are exchangeable for a set number of another security (usually common shares) at a pre-stated price, and short the underlying equities.
  • Merger/Risk Arbitrage: Trade securities of companies involved in announced corporate takeovers/mergers.
  • Special Situations: Undervalued securities are purchased in anticipation that they will rise in value because of an expected favorable turn of events.
  • Distressed Securities: Investing in securities (equity and/or debt) of a company either already in distress or facing bankruptcy, with the expectation that the company’s securities will appreciate.
  • Hedging: Buying/selling a security to offset a potential loss on another investment.
  • Leverage: Using borrowed money for investment purposes.
  • Macro: Trading and investing based on broad directional movements in stocks, bonds, foreign exchange rates, and commodity prices, often expressed through indices or other broad measurements of economic activity.
  • Managed Futures: Funds or accounts that seek to profit by taking positions in a portfolio of futures contracts. Employ trend-following strategies in futures (exchange-traded contracts to deliver a commodity at a set place, time, and price).
  • Market Neutral: Typically a strategy in which equal amounts of capital are invested long and short to “neutralize” market risk by purchasing undervalued securities and shorting the overvalued ones. Also called a “long/short” strategy.
  • Market Timing: Anticipating when to be in and out of markets. The allocation of assets among investments, primarily switching between stocks, bonds, and cash depending on market and/or economic outlook. Seeking to sell at or near the market’s top and buy at or near a market trough in particular categories of investments.
  • Short Selling: Selling a borrowed security with the anticipation that it can be purchased later at a reduced cost, generating a profit.