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WHY EQUITY MARKET NEUTRAL FUNDS OUTPERFORM

30 September 2009 by Cullen Roche 1 Comment

A great white paper here from Credit Suisse.  Must read for anyone devising market neutral strategies:

A diversified EMN fund should be an important component of a portfolio which targets reduced
correlations to equity markets and to other hedge fund strategies. In order to achieve diversification within the strategy investors should seek managers who work with a range of uncorrelated factors and proprietary models in order to avoid crowded trades.

EMN managers see the post-Lehman landscape as opportunity-rich for the strategy because there is less capital being deployed (particularly by investment bank proprietary trading desks) as well as less competition in program and high frequency trading. In short, this strategy can provide a tested low-beta portfolio component for investors who wish to garner alpha during periods of market volatility while also producing strong risk-adjusted performance over longer time periods relative to other hedge fund strategies and asset classes.


Equity_20Market_20Neutral_20white_20paper –

Source: Credit Suisse

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