Saturday, January 8, 2011

Market Neutral

Market Neutral refers to the strategy whereby the investor or portfolio manager aims to generate returns regardless of what the market is doing. There is a range of individual strategies that an investor might use to do this, such as putting together a zero beta portfolio (e.g. by using derivatives to alter the portfolio beta), or by using a long-short strategy (e.g. going long half the stocks in a sector, and short the other half - or across the market), or it may focus on market independent strategies such as M&A arbitrage, other forms of arbitrage, and so-on.

Synonyms: Neutral, Zero Beta

If you have any further questions or would like to add to this fund management term, then please submit your thoughts below.

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