Saturday, January 8, 2011

Momentum Fund

A momentum fund is a type of investment fund that uses strategies which look to ride momentum in trends such as earnings or price movements. The fund manager will employ a range of research and analytical tools to find price trends and earnings trends, this area can become quite sophisticated, with some employing advanced statistical/quantitative analysis to determine price trend patterns and generation of trading signals. In practice the portfolio manager will look to buy stocks that are trending up, in effort to ride the wave up, and then sell before or after it has peaked. These types of funds are popular during bull markets, due to the success of such strategies in an environment of generally rising prices. These types of funds tend to have higher turnover ratios, due to a higher frequency of trading; especially amongst the heavily quant-driven funds.

Synonyms: Active fund, Market timing, Momo fund

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Fund Management Terminology and Concepts Explained:

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