Long/Short Equity
Definition
The classic hedge fund strategy: buying (going long) stocks expected to rise and shorting stocks expected to fall, aiming to profit on the spread while hedging market risk.
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Let's Talk Hedge Funds
These guides explain the major hedge fund strategies, how funds are structured, how analysts and PMs are paid, and the trade-offs of the career.
Fast facts
Hedge Funds at a glance
2-and-20Classic fees2% of assets plus 20% of profits, often over a high-water mark.
4 bucketsCore strategiesLong/short equity, global macro, event-driven, relative value.
AbsoluteReturn targetAim to make money whether markets rise or fall.
Long & shortBoth directionsShort selling and leverage let funds profit from declines.
AccreditedInvestors onlyInstitutions and high-net-worth individuals, with lock-up periods.
IB & ERThe usual way inAnalysts arrive from banking or equity research; pay tracks fund performance.
Key Terms
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Frequently Asked Questions
A hedge fund pools investor capital and trades a wide range of securities to generate returns that ideally do not simply track the market. Strategies range from long/short equity to global macro, credit, and quantitative trading.
Fundamental equity funds often hire from investment banking or equity research; quant funds hire from STEM and programming backgrounds. A sharp, well-defended investment pitch is usually the centerpiece of the interview.
Compensation is heavily tied to performance. In a strong year a good analyst or PM can earn far more than in private equity or banking; in a bad year, bonuses shrink and seats can disappear. It is high-risk, high-reward.
Hedge funds trade liquid, publicly traded securities and can move in and out of positions quickly. Private equity buys entire private companies and holds them for years. The skill sets, time horizons, and day-to-day work are very different.
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