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.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.
-
Aberforth Smaller Companies Trust: a fund that lets you buy Britain on a triple discount
Opinion If UK stocks return to favour, Aberforth Smaller Companies Trust, a value-focused investment trust, should perform well, says Max King
-
Infrastructure investing: a haven of stable growth amid market turmoil
From booming construction in emerging markets to digital and green transitions, the infrastructure sector offers security, returns and long-term opportunities