Classic Hedge Fund Trading Strategies I
Trevor Pugh
20 years: Trading & hedge funds
In this video, Trevor gives a detailed explanation of various types of strategies employed by a hedge fund. He further takes us through the real-life examples of some of the more famous trades that have taken place over the years.
In this video, Trevor gives a detailed explanation of various types of strategies employed by a hedge fund. He further takes us through the real-life examples of some of the more famous trades that have taken place over the years.
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Classic Hedge Fund Trading Strategies I
10 mins 8 secs
Key learning objectives:
Define Macro funds
Define Equity Hedge funds
Define High Frequency Trading
Overview:
Hedge funds typically operate with a simpler goal, they must make money and produce returns while adhering to the laws and regulations that regulate them. Hedge funds tend to specialise and stick to the strategies and markets they know best. These strategies vary from large-picture macroeconomic strategies to relative value strategies that take advantage of minor differences in valuation between similar securities.
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What are Macro funds?
Macro funds trade the market's bigger picture themes. They primarily trade in the government bond and foreign exchange markets, as well as equity indices, enhancing returns by using underlying securities as well as derivatives such as futures and options.
The big Macro trades tend to be the most famous hedge fund trades.
What are Equity Hedge funds?
Equity hedge funds are one of the most common forms of funds. Alfred Winslow Jones founded the first hedge fund in 1949 as an equity long short strategy. He chose low-cost stocks and purchased them, while selling high-cost stocks to 'hedge' the risk.
In this way, he eliminated the trade's outright market risk. It is important to note that much of the risk of any equity is related to the broader market trend rather than being specific to that business.
What is High Frequency Trading?
High Frequency Trading (HFT) is a form of electronic trading used by banks and hedge funds to trade at extremely high speeds. The faster a fund can receive and act on data, the better their edge. HFT does not necessarily fall into any one of the main categories of fund, it can be applied to many areas.
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Trevor Pugh
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