Alternative Investment Solutions Ltd.

Education Center

All forms of investment funds, companies, and private partnerships that

• use derivatives intensively for hedging or for directional investing
• and/or engage in short-selling
• and/or use significant leverage through borrowing.

There are various investment strategies used by Hedge Funds, each offering different degrees of risk and return. We differentiate between directional and relative Value Hedge Funds. Relative Value Hedge Funds are able to generate performance regardless of the overall direction of the market. Each Hedge Fund can invest in various instruments like fixed income products, equities, currencies or commodities. Knowing and understanding the characteristics of the many different hedge fund strategies is essential to capitalizing on their variety of investment opportunities.

Long/Short Equity is the most common Hedge Fund strategy. A Long/Short Equity manager takes simultaneously long and short positions in different stocks of the same stock market thereby eliminating a large part of the directional market risk. Hence, the focus is set on stock selection rather than market timing. Most long/short equity managers use little leverage which leads to a volatility and downside risk that is lower than for traditional equity funds.