Opportunistic Strategies: Global Macro Strategies
Global macro strategies encompass asset classes and investment instruments, including commodities, currencies, metals, fixed-income, and equities. These strategies aim to identify opportunities by examining global relationships. Global macro managers focus on specific themes, regions, or styles and typically hold views…
Relative Value Strategies: Fixed-Income Arbitrage
Fixed-income arbitrage strategies aim to capitalize on pricing inefficiencies by simultaneously taking long and short positions in various debt securities, such as government and corporate bonds, bank loans, and consumer debt (including credit card loans, student loans, and mortgage-backed securities)….
Event-driven Strategies: Merger Arbitrage
Event-driven (E.D.) hedge fund strategies involve the practice of taking positions in corporate securities and derivatives. These positions are taken with the aim of profiting from various corporate events, such as mergers and acquisitions, bankruptcies, share issuances, buybacks, capital restructurings,…
Equity Strategies: Long/Short Equity
Long/Short Equity Long/short (L/S) equity managers engage in the purchase of equities they anticipate will appreciate (long positions in undervalued companies) and the short selling of equities they believe will decline in value (short positions in overvalued companies). The primary…
An Overview and Categorization of Hedge Fund Strategies
Hedge funds are a complex aspect of alternative investments, with advantages and disadvantages. The fundamental dilemma is whether the additional fees associated with hedge fund investments are justified by the potential for increased returns (alpha) and portfolio diversification. This debate…
Market-Based Valuation
Analysts frequently attempt to calculate the value of private companies by referencing market-based multiples derived from comparable public companies' stock shares. This approach is favored over the income-based valuation method discussed earlier. While, in some instances, these multiples are modified…
Income Approach Methods of Private Company Valuation
In earlier sections, we discussed adjusting valuation parameters for private companies, including income normalization and required rate of return changes. After determining the firm's value, control, and marketability, premiums or discounts may be applied based on the evaluator's perspective and…
How Current Rate Method and the Temporal Method Affect Financial Statements and Ratios
Both the current rate and temporal methods have a significant impact on the parent company’s financial statements and ratios. The following example demonstrates the effects under each translation method. Example: Effects of Using the Current Rate and the Temporal Methods…
Effects of a Defined Benefit Plan’s Assumptions on the Defined Benefit Obligation and Periodic Pension Cost
Understanding the effects of assumptions on the estimated pension obligation and periodic pension costs helps in the interpretation of a company’s financial statements. Moreover, it aids in the evaluation of whether the assumptions are relatively conservative or aggressive. The amount…
