To make money in the next decade, you must be willing to invest in new ideas. The easy money in hedge funds may already have been made.
A hedge fund manager
As we extensively covered in Chapter 1, the hedge fund industry has been changing the makeup of its investment strategies since the beginning of the 1990s, reflecting the rising and falling performance of the various strategies. The search for new areas of investment is to be considered an evolutionary process, linked to the struggle for survival fought by hedge funds. At present, the hedge fund industry is rapidly shifting towards new frontiers and the emerging strategies are PIPEs, long/short credit, energy trading and structured finance. At the same time, long-standing strategies are being revised, in particular investments in commodities and real estate.
Not surprisingly, market operators who use the same research and the same investment approach, try to seize the same opportunities, invest on the same markets, and end up with similar results. To obtain different results, it is often necessary to operate along different modalities from those prevailing among most competitors.
The following strategies can be single strategies used by hedge funds, but more often they are one of a series of strategies adopted by multi-strategy funds:
• holding company arbitrage;
• closed-end fund arbitrage;
• statistical arbitrage;
• index arbitrage;
• volatility trading;
• split-strike conversion;
• PIPEs or Regulation ...