Japan hedge fund

 

Hedge fund glossary of terms C - E

8.  hedge fund glossary of terms C - E

Closed-ended fund

A hedge fund or open-end mutual fund that has at least temporarily stopped accepting capital from investors, usually due to rapid asset growth. Not to be confused with a closed-end fund.

 

Compounded monthly return

The average monthly increase that, when compounding is taken into account, would have produced a fund's total return over any period of time. For example, if a fund had a one-year return of 20%, its compounded monthly return would be 1.53% -- the amount it would have needed to gain in each of 12 months to achieve that full-year result.

 

Convertible arbitrage investment strategy

A conservative, market-neutral approach that aims to profit from pricing differences or inefficiencies between the values of convertible bonds and common stock issued by the same company. Managers of such funds generally purchase undervalued convertible bonds and short-sell the same issuers' stock. The approach typically involves a medium-term holding period and results in low volatility.

 

Derivative

A financial instrument whose performance is linked to a specific security, index or financial instrument. Typically, derivatives are used to transfer risk or negotiate the future sale or delivery of an investment. Derivative instruments come in four basic forms: forward contracts, futures contracts, swaps and options.

 

Distressed securities investment strategy

Purchasing deeply discounted securities that were issued by troubled or bankrupts companies. Also, short-selling the stocks of those corporations. Such funds are usually able to achieve low correlations to the broader financial markets. The approach generally involves a medium- to long-term holding period.

 

Drawdown

The percentage loss that a fund incurs from its peak net asset value to its lowest value. The maximum drawdown over a significant period is sometimes employed as a means of measuring the risk of a vehicle. Usually expressed as a percentage decline in net asset value.

 

Emerging-markets investment strategy

Investing in stocks or bonds issued by companies and government entities in developing countries, usually in Latin America, Eastern Europe, Africa and Asia. Such funds typically employ a short- to medium-term holding period and experience high volatility.

 

Event-driven investment strategy

An approach that seeks to anticipate certain events, such as mergers or corporate restructures. Such funds, which include risk-arbitrage vehicles and entities that buy distressed securities, typically employ medium-term holding periods and experience moderate volatility.

 

9.  hedge fund glossary of terms F - H >>


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