Market Neutral Funds

Market neutral funds bet on perceived market systems to deliver above-market returns and lower risk in the market where they pick up the most bullish and diversified set of stocks to make diversified bearish shorts. The investor can earn from the interest generated by placing cash on short sales of money markets.  The two common strategies are statistical and fundamental arbitrages. These are the most common strategies having a lot of diversity where if the portfolio has already a number of those exposures, its excessiveness may not deliver the same benefits. The strategy can be single or multiple, where single strategy funds on specific regions or specific asset classes may offer higher volatilities and absolute returns where the performance of such exposures can be cyclical over time. 

Whilst some funds use alternative strategies but most neutral equities performed higher than the equity funds with the emphasis on low risk taking. The managers tend to place certain specialised bets on price convergence, avoiding exposure to general market risk. Their performance outdoes any other funds during the market loss. Furthermore, they are more resilient against any sudden changes in liquidity due to the strategy’s balanced nature. The liquidity risk persists but it plays a lesser factor than the other strategies.