6 Hedge Fund Strategies to Put in Your Back Pocket

Anticipation of future company-specific events

Since hedge funds sometimes achieve returns based on speculation, the anticipation-based strategy is very common. For example, a hedge fund can invest in a company that is reporting losses, expecting that it will bring higher profits in the future, or in a company that can be purchased by another company at a price that exceeds the current value of a company’s share capital.

We’d classify activist investing under this category, as investors like Dan Loeb (pictured left) and Carl Icahn attempt to convince the companies they’re invested in to undertake value creation methods like a dividend hike or a stock repurchase program.

However, this strategy involves a certain amount of risk (hence the surfboard), and if the anticipation of the event fails, with a significant amount invested in the company, the hedge fund may bear large losses.