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Risky Business?

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Executive Summary

This article provides the concerns about market-neutral funds. It mentions that unlike hedge funds and private accounts market-neutral mutual funds are subject to the vagaries of cash flows, which could add considerably to the difficulties of maintaining a hedge. Market-neutral funds aim to deliver above-market returns with lower risk by hedging bullish stock picks with an equivalent, but diversified, number of bearish, or short, bets. Some income is also generated from the interest earned by placing the cash proceeds of the short sales in a money-market account. However, one should make no mistake, there is nothing simple about market-neutral funds.

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