{ "$schema": "https://hedgefund.wiki/api/schema.json#/definitions/Strategy", "endpoint": "https://hedgefund.wiki/api/strategies.json", "version": "2026.05.0", "description": "Hedge fund strategies organized by HFRI/Eurekahedge family. Each entry covers mechanism, return drivers, capacity, risk profile, historical context, and typical practitioners.", "count": 16, "strategies": [ { "id": "long-short-equity", "name": "Long/Short Equity", "family": "equity-hedge", "summary": "Hold long positions in expected outperformers, short positions in expected underperformers. Net exposure tunes market beta.", "mechanism": "Pick stocks (or baskets) on fundamental, quantitative, or hybrid signals. Hedge market exposure by shorting individual names, sector ETFs, or index futures. P&L = idiosyncratic spread of longs over shorts + (residual net exposure × market move).", "return_drivers": ["stock selection", "sector tilt", "factor exposure", "net exposure timing"], "typical_instruments": ["common stock", "single-stock options", "sector ETFs", "index futures"], "typical_holding_period": "weeks to quarters", "leverage_typical": { "gross_low": 1.5, "gross_high": 4.0, "net_low": -0.2, "net_high": 0.7 }, "typical_sharpe": { "low": 0.5, "high": 1.5 }, "capacity_usd": { "single_fund_billion_low": 1, "single_fund_billion_high": 30, "industry_billion": 1100 }, "correlation_to_sp500_typical": { "low": 0.3, "high": 0.7 }, "best_environment": "Wide single-stock dispersion, low correlation across names, fundamental research valued by the market.", "worst_environment": "Compressed dispersion, factor crowding, sustained low-vol bull markets where shorts compress alpha.", "famous_practitioners": ["A.W. Jones (originator, 1949)", "Julian Robertson (Tiger)", "Stephen Mandel (Lone Pine)", "John Griffin (Blue Ridge)", "Lee Ainslie (Maverick)"], "notable_blowups": [ { "type": "event", "id": "tiger-asia-2012", "label": "Tiger Asia insider trading shutdown" } ], "related_terms": [ { "type": "term", "id": "long-short-equity" }, { "type": "term", "id": "market-neutral" }, { "type": "term", "id": "gross-exposure" }, { "type": "term", "id": "net-exposure" } ], "related_formulas": [ { "type": "formula", "id": "jensens-alpha" }, { "type": "formula", "id": "beta-regression" } ], "regulations": [ { "type": "regulation", "id": "reg-sho", "label": "Reg SHO (short selling)" } ], "history": "Originated by Alfred Winslow Jones in 1949 with the first 'hedged fund' — long undervalued stocks, short overvalued, leverage to amplify. Tiger Management and the 'Tiger Cubs' formalized fundamental L/S in the 1980s-2000s. The 2010s saw factor-decomposition exposing how much of L/S returns were value/quality factor beta. The 2020s saw consolidation: many traditional L/S funds shrank or shut as multi-strat pods absorbed talent.", "tags": ["equity", "fundamental", "directional"] }, { "id": "equity-market-neutral", "name": "Equity Market Neutral", "family": "equity-hedge", "summary": "Long/short equity book engineered to zero-out market beta (and often factor exposures), capturing pure idiosyncratic spread.", "mechanism": "Construct longs and shorts so weighted beta is ~0; in factor-neutral variants, also zero out size, value, momentum, sector. Returns come from cross-sectional stock selection.", "return_drivers": ["stock selection (idiosyncratic alpha)", "fast factor exposures within constraints"], "typical_instruments": ["common stock", "futures (for hedging residual beta)"], "typical_holding_period": "days to weeks", "leverage_typical": { "gross_low": 4, "gross_high": 12, "net_low": -0.05, "net_high": 0.05 }, "typical_sharpe": { "low": 1.0, "high": 2.5 }, "capacity_usd": { "single_fund_billion_low": 0.5, "single_fund_billion_high": 5, "industry_billion": 250 }, "correlation_to_sp500_typical": { "low": -0.1, "high": 0.2 }, "best_environment": "High dispersion, stable factor regimes.", "worst_environment": "Factor regime shifts (Q1 2009 momentum crash, March 2020 quant carnage).", "famous_practitioners": ["AQR", "Two Sigma Compass", "PDT Partners (Morgan Stanley/Mike Reed)", "DE Shaw"], "related_terms": [ { "type": "term", "id": "market-neutral" }, { "type": "term", "id": "beta" }, { "type": "term", "id": "fama-french-factors" } ], "history": "Outgrowth of Bamberger/Tartaglia's stat arb at Morgan Stanley APT in the 1980s. Modern multi-manager pods are the institutional successor.", "tags": ["equity", "neutral", "systematic"] }, { "id": "merger-arbitrage", "name": "Merger Arbitrage", "family": "event-driven", "summary": "Capture the spread between announced acquisition price and target market price; manage the risk that the deal breaks.", "mechanism": "Cash deal: long target after announcement. Stock deal: long target, short acquirer in the announced exchange ratio. Hedge regulatory and execution-risk subsets via options where economical.", "return_drivers": ["base rate of deal closure (>95% historically)", "spread compression (annualized 4-8% in normal markets)", "occasional retrades and bumps"], "typical_instruments": ["common stock", "single-stock options", "credit (for LBO targets)"], "typical_holding_period": "weeks to months (until deal close or break)", "leverage_typical": { "gross_low": 1.5, "gross_high": 4 }, "typical_sharpe": { "low": 0.7, "high": 1.5 }, "capacity_usd": { "single_fund_billion_low": 1, "single_fund_billion_high": 8, "industry_billion": 80 }, "correlation_to_sp500_typical": { "low": 0.1, "high": 0.4 }, "best_environment": "High M&A volume, predictable regulators, accommodating financing markets.", "worst_environment": "Hostile antitrust environment (FTC Khan, EU Vestager), tightening credit conditions, surprise rate moves widening all spreads.", "famous_practitioners": ["Paulson & Co (pre-2010)", "York Capital (event)", "Kellner Capital", "Pentwater", "Magnetar"], "notable_blowups": [ { "type": "event", "id": "weil-gotshal-clearwire-2013" } ], "related_terms": [ { "type": "term", "id": "deal-spread" }, { "type": "term", "id": "break-risk" }, { "type": "term", "id": "mac-clause" } ], "regulations": [{ "type": "regulation", "id": "hsr-act" }], "history": "Practiced informally since the 1940s; institutionalized by Goldman's risk arb desk under Robert Rubin in the 1970s-80s. The 2024-26 era is the most regulator-hostile environment in decades.", "tags": ["event-driven", "arbitrage", "merger-arb"] }, { "id": "convertible-arbitrage", "name": "Convertible Arbitrage", "family": "relative-value", "summary": "Long the convertible bond, short the underlying stock in delta-equivalent quantity; harvest gamma, vega, and credit-spread carry.", "mechanism": "Decompose convert into bond floor + embedded call. Delta-hedge the call by shorting stock; rehedge as delta moves. Capture convex P&L (long gamma), realized vol < implied (long vega vs IV), and bond carry minus stock borrow.", "return_drivers": ["gamma scalping", "vega (realized > implied)", "credit spread tightening", "bond carry"], "typical_instruments": ["convertible bonds", "common stock (short hedge)", "CDS (credit hedge)"], "typical_holding_period": "months to a year", "leverage_typical": { "gross_low": 3, "gross_high": 8 }, "typical_sharpe": { "low": 0.5, "high": 1.5 }, "capacity_usd": { "single_fund_billion_low": 0.5, "single_fund_billion_high": 5, "industry_billion": 50 }, "correlation_to_sp500_typical": { "low": 0.2, "high": 0.5 }, "best_environment": "Active convert issuance, rising realized vol, tightening credit.", "worst_environment": "2008-style credit crisis where forced deleveraging crushed all converts simultaneously.", "famous_practitioners": ["Citadel Wellington (early)", "Highbridge", "AQR Convertible", "Calamos", "Polygon"], "related_terms": [ { "type": "term", "id": "convertible-arbitrage" }, { "type": "term", "id": "gamma" }, { "type": "term", "id": "vega" }, { "type": "term", "id": "implied-volatility" } ], "history": "Largest hedge fund strategy by AUM in early 2000s. Nearly destroyed in 2008 (HFRI Conv Arb -34% in 2008, +60% in 2009 as forced sellers gave way to fundamental buyers). Steady but smaller strategy since.", "tags": ["relative-value", "convertibles", "vol"] }, { "id": "global-macro", "name": "Global Macro", "family": "global-macro", "summary": "Top-down directional and relative-value bets across rates, FX, equity indices, and commodities driven by macroeconomic theses.", "mechanism": "Form macro views (rate cycles, growth, inflation, central bank policy, geopolitics). Express via futures, swaps, options for capital efficiency. Common trades: rate steepeners/flatteners, FX carry, breakeven inflation, equity-vs-rates RV.", "return_drivers": ["regime change", "policy surprises", "term-structure mispricing", "EM sovereign mispricing"], "typical_instruments": ["rate futures", "swaps", "FX forwards/options", "equity index futures", "commodity futures"], "typical_holding_period": "weeks to quarters", "leverage_typical": { "gross_low": 3, "gross_high": 15 }, "typical_sharpe": { "low": 0.4, "high": 1.5 }, "capacity_usd": { "single_fund_billion_low": 2, "single_fund_billion_high": 30, "industry_billion": 600 }, "correlation_to_sp500_typical": { "low": -0.2, "high": 0.4 }, "best_environment": "Regime change (1992 ERM, 2008 GFC, 2022 inflation surge).", "worst_environment": "Compressed-vol bull markets with no macro turning points (2014-2019 was brutal for discretionary macro).", "famous_practitioners": ["George Soros", "Stanley Druckenmiller", "Louis Bacon (Moore)", "Paul Tudor Jones", "Alan Howard (Brevan Howard)", "Said Haidar"], "notable_blowups": [ { "type": "event", "id": "ltcm-collapse" }, { "type": "event", "id": "amaranth-2006" } ], "related_terms": [ { "type": "term", "id": "carry-trade" }, { "type": "term", "id": "yield-curve-inversion" } ], "history": "The 'big bet' era (Soros breaks the BoE, 1992) defined the 1990s. Shrunk through the 2010s zero-rate compression. Powerful resurgence in 2022-2024 as inflation broke the regime open.", "tags": ["macro", "directional", "discretionary"] }, { "id": "managed-futures", "name": "Managed Futures (CTA)", "family": "managed-futures", "summary": "Systematic trading of liquid futures contracts across global markets, dominated by trend-following.", "mechanism": "Signal generation: typically combinations of trend (multi-timescale moving averages, breakouts, momentum), carry, value, and volatility-scaled positioning. Trade ~100-300 futures markets across rates, FX, equities, and commodities. Risk-allocate via inverse-vol or equal-risk-contribution.", "return_drivers": ["sustained directional moves", "crisis alpha (long puts via trend)", "diversification across uncorrelated markets"], "typical_instruments": ["futures (rates, FX, equity, commodity)", "occasional FX forwards", "no individual securities"], "typical_holding_period": "weeks to months", "leverage_typical": { "gross_low": 5, "gross_high": 20 }, "typical_sharpe": { "low": 0.4, "high": 1.0 }, "capacity_usd": { "single_fund_billion_low": 1, "single_fund_billion_high": 50, "industry_billion": 380 }, "correlation_to_sp500_typical": { "low": -0.3, "high": 0.2 }, "best_environment": "Sustained directional moves across many markets (1980s rate decline, 2008 GFC, 2022 inflation).", "worst_environment": "Choppy mean-reverting markets without sustained trends (2009-2013 was painful).", "famous_practitioners": ["Man AHL", "Winton", "BlueTrend (Leda Braga)", "Aspect Capital", "Campbell & Co", "Millburn", "Graham Global", "Lynx Asset Management"], "related_terms": [ { "type": "term", "id": "trend-following" }, { "type": "term", "id": "managed-futures" }, { "type": "term", "id": "momentum" } ], "regulations": [{ "type": "regulation", "id": "cftc-cta-registration" }], "history": "Roots in 1970s commodity trading (Dunn, Henry, Donchian). Exploded in 1980s-90s via institutional adoption (Man Group, Winton). 2022 was the strategy's best year since 2008 (SG Trend Index +27%).", "tags": ["systematic", "trend", "futures"] }, { "id": "statistical-arbitrage", "name": "Statistical Arbitrage", "family": "quantitative", "summary": "High-breadth, short-horizon mean-reversion or relative-value trading driven by statistical signals — typically thousands of small positions held for hours to days.", "mechanism": "Cross-sectional mean reversion within sector or factor neutralization. Modern signals: order-book imbalance, alt-data nowcasts, ML embeddings, news/text sentiment, microstructure features. Positions sized inverse-vol with portfolio-level beta and factor neutrality.", "return_drivers": ["mean reversion in residual returns", "microstructure flow", "alt-data signals"], "typical_instruments": ["common stock", "ADRs", "ETFs (for hedging)"], "typical_holding_period": "minutes to days", "leverage_typical": { "gross_low": 4, "gross_high": 12 }, "typical_sharpe": { "low": 1.5, "high": 4.0 }, "capacity_usd": { "single_fund_billion_low": 1, "single_fund_billion_high": 15, "industry_billion": 120 }, "correlation_to_sp500_typical": { "low": -0.1, "high": 0.2 }, "best_environment": "Stable microstructure, moderate vol, dispersion across names.", "worst_environment": "August 2007 quant quake; March 2020 deleveraging cascade.", "famous_practitioners": ["DE Shaw", "Renaissance Medallion (closed)", "Two Sigma", "PDT Partners", "Jane Street (adjacent)", "Hudson River Trading (adjacent)"], "notable_blowups": [ { "type": "event", "id": "august-2007-quant-quake" } ], "related_terms": [ { "type": "term", "id": "statistical-arbitrage" }, { "type": "term", "id": "pairs-trading" }, { "type": "term", "id": "cointegration" } ], "history": "Pioneered at Morgan Stanley APT under Bamberger (early 1980s) and Tartaglia (later 1980s). Spawned a diaspora — DE Shaw, Renaissance, PDT, and the modern HFT firms all trace lineage. The August 2007 'quant quake' (week of Aug 6-10, 2007) saw cross-firm deleveraging produce -10 sigma single-day moves; survivors thrived after.", "tags": ["quant", "systematic", "mean-reversion"] }, { "id": "fixed-income-relative-value", "name": "Fixed Income Relative Value", "family": "relative-value", "summary": "Long/short bond and rate-derivative trades exploiting small mispricings — basis trades, swap spreads, on-the-run/off-the-run, butterfly trades.", "mechanism": "Pair long cheap with short rich (e.g., long off-the-run / short on-the-run), finance via repo, hold to convergence. High leverage (20-100×) is required to make small basis points meaningful.", "return_drivers": ["mean reversion of mispricing", "carry while waiting", "occasional widening when shocks force unwinds"], "typical_instruments": ["Treasuries (cash and futures)", "swaps", "repo", "options on rates"], "typical_holding_period": "weeks to quarters", "leverage_typical": { "gross_low": 15, "gross_high": 80 }, "typical_sharpe": { "low": 1.0, "high": 2.5 }, "capacity_usd": { "single_fund_billion_low": 2, "single_fund_billion_high": 20, "industry_billion": 400 }, "correlation_to_sp500_typical": { "low": -0.1, "high": 0.3 }, "best_environment": "Stable rate vol, deep repo markets, no forced deleveraging.", "worst_environment": "Liquidity crunches force forced unwinds (LTCM 1998, March 2020).", "famous_practitioners": ["LTCM (defunct)", "Citadel Fixed Income", "Millennium Rates", "ExodusPoint", "PIMCO Tactical"], "notable_blowups": [ { "type": "event", "id": "ltcm-collapse" }, { "type": "event", "id": "march-2020-dash-for-cash" } ], "related_terms": [ { "type": "term", "id": "treasury-basis-trade" }, { "type": "term", "id": "duration" }, { "type": "term", "id": "convexity" } ], "history": "John Meriwether's Salomon prop desk → LTCM (1994-98) defined the genre and its risks. The Treasury basis trade has grown to ~$1tn in 2026, a regulatory focus.", "tags": ["relative-value", "rates", "basis"] }, { "id": "distressed-debt", "name": "Distressed Debt", "family": "credit", "summary": "Investing in deeply discounted debt of companies in or near restructuring, often with the intent of converting to equity.", "mechanism": "Buy fulcrum debt at distressed prices (typically 30-70 cents). Either trade out on news or work through restructuring (committee membership, plan sponsorship, loan-to-own equity). Returns realized on emergence (12-36 months typical).", "return_drivers": ["recovery > price paid", "fulcrum-to-equity conversion uplift", "DIP financing fees", "trading distressed names through volatility"], "typical_instruments": ["bank debt", "high-yield bonds", "trade claims", "bespoke financings"], "typical_holding_period": "1-3 years (event-driven)", "leverage_typical": { "gross_low": 1.0, "gross_high": 2.0 }, "typical_sharpe": { "low": 0.5, "high": 1.2 }, "capacity_usd": { "single_fund_billion_low": 2, "single_fund_billion_high": 30, "industry_billion": 350 }, "correlation_to_sp500_typical": { "low": 0.3, "high": 0.6 }, "best_environment": "Default cycle peak (2002, 2009, 2020, 2024-25 partial).", "worst_environment": "Default-rate trough with cheap financing keeping zombie companies alive.", "famous_practitioners": ["Oaktree (Howard Marks)", "Apollo", "Elliott", "Davidson Kempner", "King Street", "Silver Point", "Centerbridge"], "related_terms": [ { "type": "term", "id": "fulcrum-security" }, { "type": "term", "id": "distressed-debt" }, { "type": "term", "id": "credit-default-swap" } ], "history": "Pioneered by Drexel alum (Marks at TCW) and bond traders (Tepper at Goldman/Appaloosa). The 2008-2010 cycle made several mega-fortunes; 2020 was a missed cycle (Fed action prevented the workout). 2024-25 commercial real estate distress is the next test.", "tags": ["credit", "distressed", "event-driven"] }, { "id": "credit-long-short", "name": "Credit Long/Short", "family": "credit", "summary": "Long credits with improving fundamentals or attractive carry, short credits at risk of widening; commonly hedged via CDS or index credit.", "mechanism": "Single-name high yield or IG bond/loan picks long, hedged with CDS, CDX/iTraxx index, or other credits. Capital structure arbitrage (long bond / short equity, or vice versa) is a sub-strategy.", "return_drivers": ["spread tightening on longs", "spread widening on shorts", "carry differential", "convexity of credit"], "typical_instruments": ["bonds", "loans", "CDS single-name", "CDX/iTraxx index"], "typical_holding_period": "months to a year", "leverage_typical": { "gross_low": 2, "gross_high": 5 }, "typical_sharpe": { "low": 0.5, "high": 1.5 }, "capacity_usd": { "single_fund_billion_low": 1, "single_fund_billion_high": 12, "industry_billion": 280 }, "correlation_to_sp500_typical": { "low": 0.3, "high": 0.6 }, "best_environment": "Mid-cycle dispersion, moderate vol, healthy primary issuance.", "worst_environment": "Credit blow-ups in late cycle when correlations go to 1.", "famous_practitioners": ["Brigade Capital", "BlueMountain (defunct)", "BlueBay", "GoldenTree", "King Street", "Diameter"], "related_terms": [ { "type": "term", "id": "credit-default-swap" }, { "type": "term", "id": "credit-spread" }, { "type": "term", "id": "oas" } ], "tags": ["credit", "long-short"] }, { "id": "activist", "name": "Activist", "family": "event-driven", "summary": "Take large positions in companies and publicly campaign for changes — capital allocation, board composition, M&A, breakup — to unlock value.", "mechanism": "Build 5-10% position. File 13D. Issue letters, white papers, board nominees, sometimes proxy contests. Catalysts: cost cuts, divestitures, buybacks, sale of company, new CEO. Holding periods 18-36 months typical.", "return_drivers": ["catalyst-driven multiple expansion", "improved capital allocation", "M&A premium", "settlement-driven board changes"], "typical_instruments": ["common stock", "options (defensive)", "swaps for stealth accumulation pre-13D"], "typical_holding_period": "18 months to 3 years", "leverage_typical": { "gross_low": 1, "gross_high": 1.5 }, "typical_sharpe": { "low": 0.4, "high": 1.2 }, "capacity_usd": { "single_fund_billion_low": 1, "single_fund_billion_high": 25, "industry_billion": 200 }, "correlation_to_sp500_typical": { "low": 0.5, "high": 0.85 }, "best_environment": "Mid-cycle when targets are mispriced and management is willing to engage; bull markets that reward catalysts.", "worst_environment": "Bear markets where catalysts are overwhelmed by beta.", "famous_practitioners": ["Carl Icahn (Icahn Enterprises)", "Bill Ackman (Pershing Square)", "Nelson Peltz (Trian)", "Paul Singer (Elliott)", "Daniel Loeb (Third Point)", "Jeff Smith (Starboard)", "ValueAct"], "related_terms": [ { "type": "term", "id": "13d-filing" }, { "type": "term", "id": "proxy-contest" }, { "type": "term", "id": "poison-pill" } ], "regulations": [ { "type": "regulation", "id": "regulation-13d" }, { "type": "regulation", "id": "hsr-act" } ], "history": "1980s 'corporate raiders' (Icahn, Pickens, Lindner) → 1990s value activism (Steinhardt, Tisch) → 2000s on engagement-style (Ackman, Loeb, Peltz). The 2024 'universal proxy card' SEC rule lowered barriers for board contests.", "tags": ["event-driven", "activist", "engagement"] }, { "id": "multi-strategy", "name": "Multi-Strategy (Pod Shop)", "family": "multi-strategy", "summary": "A platform allocating capital to many independent portfolio managers (pods), each with strict risk limits and short stop-loss leashes.", "mechanism": "Centralized risk, technology, financing, compliance. Each pod runs a sub-book in a defined strategy (equity sector L/S, rates RV, commodity macro, credit, vol, etc). Risk allocator manages capital and stop-losses. Pass-through expense structure (typically 5-8% gross) funds infrastructure and PM comp.", "return_drivers": ["diversification across uncorrelated alpha streams", "tight risk control limiting drawdowns", "scale economies in technology and financing"], "typical_instruments": ["all liquid asset classes — equity, rates, FX, commodity, credit"], "typical_holding_period": "varies by pod (days to years)", "leverage_typical": { "gross_low": 4, "gross_high": 8 }, "typical_sharpe": { "low": 1.5, "high": 3.5 }, "capacity_usd": { "single_fund_billion_low": 5, "single_fund_billion_high": 70, "industry_billion": 600 }, "correlation_to_sp500_typical": { "low": -0.05, "high": 0.2 }, "best_environment": "Almost all environments — the model's diversification is its edge.", "worst_environment": "March 2020-style cross-strategy deleveraging cascades; 'pod-quake' moments when too many pods crowd into the same factor.", "famous_practitioners": ["Citadel (Wellington)", "Millennium", "Point72", "ExodusPoint", "Balyasny (BAM)", "Schonfeld", "Walleye", "Hudson Bay", "Verition", "Eisler"], "related_terms": [ { "type": "term", "id": "multi-strategy-pod" }, { "type": "term", "id": "pass-through-expenses" } ], "history": "Steve Cohen's SAC (1992-2013) was the prototype. Citadel and Millennium institutionalized the platform model. Post-2017 model dominance: 8 of the 10 largest hedge funds by AUM in 2026 are multi-strat platforms. Capacity is the binding constraint: most are closed to new capital.", "tags": ["multi-manager", "platform", "diversified"] }, { "id": "volatility-arbitrage", "name": "Volatility Arbitrage", "family": "relative-value", "summary": "Trade implied vs realized volatility, vol surface relative value, dispersion (index vol vs single-name vol), and tail-vol structures.", "mechanism": "Sub-strategies: (1) variance swap RV (long realized / short implied); (2) dispersion (short index vol / long basket of single-name vol); (3) skew/term-structure RV; (4) tail vol (long deep OTM puts as portfolio convexity).", "return_drivers": ["variance risk premium (RV < IV on average)", "dispersion premium", "skew mispricing"], "typical_instruments": ["options", "variance swaps", "VIX futures", "OTC vol structures"], "typical_holding_period": "days to months", "leverage_typical": { "gross_low": 2, "gross_high": 8 }, "typical_sharpe": { "low": 0.6, "high": 2.0 }, "capacity_usd": { "single_fund_billion_low": 0.5, "single_fund_billion_high": 6, "industry_billion": 80 }, "correlation_to_sp500_typical": { "low": -0.5, "high": 0.3 }, "best_environment": "Modestly volatile range markets — short-vol thrives.", "worst_environment": "Vol spike (Volmageddon Feb 2018, COVID March 2020) destroys short-vol strategies.", "famous_practitioners": ["Capstone (Paul Britton)", "QVT", "LMR Partners", "Saba Capital (Boaz Weinstein)", "Universa (Mark Spitznagel — long-vol counter-example)"], "notable_blowups": [ { "type": "event", "id": "volmageddon-2018" }, { "type": "event", "id": "ltcm-collapse" } ], "related_terms": [ { "type": "term", "id": "implied-volatility" }, { "type": "term", "id": "vol-skew" }, { "type": "term", "id": "vix" }, { "type": "term", "id": "realized-volatility" } ], "tags": ["relative-value", "vol", "options"] }, { "id": "discretionary-equity-sector", "name": "Discretionary Equity Sector Specialist", "family": "equity-hedge", "summary": "Deep-research single-sector L/S funds (TMT, healthcare, energy, consumer, financials) — concentrated portfolios reflecting expert insight.", "mechanism": "Sector PMs hold 20-60 names, often with a 70/30 long-short tilt. Edge comes from primary research, expert networks, channel checks, and deep industry contacts.", "return_drivers": ["stock selection within sector", "sub-sector rotation", "earnings-event timing"], "typical_instruments": ["common stock", "single-stock options"], "typical_holding_period": "quarters to years", "leverage_typical": { "gross_low": 1.5, "gross_high": 3 }, "typical_sharpe": { "low": 0.5, "high": 1.5 }, "capacity_usd": { "single_fund_billion_low": 0.3, "single_fund_billion_high": 8 }, "correlation_to_sp500_typical": { "low": 0.4, "high": 0.8 }, "famous_practitioners": ["Coatue (TMT)", "Whale Rock (TMT)", "RA Capital (biotech)", "Perceptive Advisors (biotech)", "Glenview (healthcare)", "Tybourne (TMT)", "Senator (consumer)"], "related_terms": [ { "type": "term", "id": "primary-research" }, { "type": "term", "id": "expert-network" } ], "tags": ["equity", "sector", "discretionary"] }, { "id": "crypto-quantitative", "name": "Crypto Quantitative", "family": "digital-assets", "summary": "Systematic crypto strategies — basis (cash-and-carry), funding-rate harvesting, perpetual futures market making, MEV extraction, on-chain stat arb, spot-perp triangulation.", "mechanism": "Most common: long spot BTC/ETH, short perpetual to harvest funding (cash-and-carry). Other: cross-exchange arb, vol surface RV (Deribit), DEX-CEX arb, MEV (sandwich, arb, liquidations), validator/staking yield.", "return_drivers": ["funding rate carry", "spot-perp basis", "cross-venue spread", "MEV extraction", "staking yield"], "typical_instruments": ["spot crypto (BTC, ETH, SOL, etc)", "perpetual futures", "crypto options (Deribit)", "DeFi protocols"], "typical_holding_period": "minutes to weeks", "leverage_typical": { "gross_low": 1, "gross_high": 5 }, "typical_sharpe": { "low": 1.0, "high": 4.0 }, "capacity_usd": { "single_fund_billion_low": 0.1, "single_fund_billion_high": 3, "industry_billion": 30 }, "correlation_to_sp500_typical": { "low": 0.0, "high": 0.4 }, "best_environment": "Bull markets with persistent positive funding (10-50% annualized basis trade).", "worst_environment": "Funding rate inversions, exchange counterparty events (FTX Nov 2022).", "famous_practitioners": ["Pantera Capital", "Galaxy Digital Trading", "Wintermute", "Jane Street (crypto adjacent)", "Cumberland (DRW)", "Genesis Trading (defunct)"], "notable_blowups": [ { "type": "event", "id": "ftx-collapse-2022" }, { "type": "event", "id": "three-arrows-2022" } ], "related_terms": [ { "type": "term", "id": "perpetual-futures" }, { "type": "term", "id": "funding-rate" }, { "type": "term", "id": "basis-trade" } ], "tags": ["crypto", "systematic", "basis"] }, { "id": "insurance-linked", "name": "Insurance-Linked Strategies", "family": "credit", "summary": "Allocate to catastrophe bonds, ILS, and reinsurance sidecars to capture insurance risk premium uncorrelated with traditional markets.", "mechanism": "Cat bonds: investor receives spread, principal at risk if defined catastrophe occurs. Sidecars: minority equity in special-purpose reinsurer. Collateralized reinsurance: provide collateral for specific reinsurance contracts.", "return_drivers": ["catastrophe risk premium", "diversification (truly uncorrelated)", "rising rate environment after major losses ('hard market')"], "typical_instruments": ["cat bonds", "ILW (industry loss warranties)", "reinsurance sidecars", "collateralized reinsurance"], "typical_holding_period": "1-5 years (multi-year reinsurance contracts)", "leverage_typical": { "gross_low": 1, "gross_high": 1 }, "typical_sharpe": { "low": 0.5, "high": 1.3 }, "capacity_usd": { "single_fund_billion_low": 0.5, "single_fund_billion_high": 12, "industry_billion": 110 }, "correlation_to_sp500_typical": { "low": -0.05, "high": 0.1 }, "best_environment": "Post-event 'hard market' with rate hardening (2023-2024 was a generational entry point).", "worst_environment": "Major loss years (2017 Atlantic hurricane season, 2022-23 secondary perils).", "famous_practitioners": ["Nephila", "Credit Suisse ILS (now Stone Ridge)", "RenaissanceRe Medici", "AlphaCat", "Twelve Capital", "Aeolus"], "related_terms": [ { "type": "term", "id": "cat-bond" }, { "type": "term", "id": "ils" } ], "tags": ["insurance", "uncorrelated", "alternative"] } ] }