Market neutral funds

Market neutral funds aim to deliver above market rates of return with lower risk by hedging bullish stock picks (buys) with an equivalent number of short bets (sells).

Market neutral funds aim to deliver above market rates of return with lower risk by hedging bullish stock picks (buys) with an equivalent number of short bets (sells). On top of investing, some income is also generated from the interest earned by placing the cash proceeds of the short sales in savings accounts.

The goal is to deliver consistent returns, ranging anywhere from 3% to 6% above Treasury bills or gilts, after fees, whether the market is going up or down.

However, not all market neutral funds are lower risk. The so-called double alpha or "double whammy" approach, which leverages the portfolio using futures and options, targets twice the returns - at twice the risk.

Most Popular

Should investors be worried about stagflation?
US Economy

Should investors be worried about stagflation?

The latest US employment data has raised the ugly spectre of “stagflation” – weak growth and high inflation. John Stepek looks at what’s going on and …
6 Sep 2021
Two shipping funds to buy for steady income
Investment trusts

Two shipping funds to buy for steady income

Returns from owning ships are volatile, but these two investment trusts are trying to make the sector less risky.
7 Sep 2021
How you can profit from the power of the grey pound
Share tips

How you can profit from the power of the grey pound

Higher life expectancy and surging asset prices have proved a boon for the baby-boomer generation, which has accumulated vast wealth. Younger generati…
10 Sep 2021