CFA Level I · CFA Level I Exam · Hedge Funds
Compared with a directional long/short equity fund, a relative value hedge fund strategy is most likely to:
A relative value strategy seeks profit from pricing discrepancies between related securities while limiting market exposure through offsetting long and short positions. It does not depend on forecasting market direction, and distressed concentration is characteristic of event-driven rather than relative value funds.
- Arely on forecasts of broad market direction.
- Bhold concentrated positions only in distressed securities.
- Cseek profit from pricing discrepancies between related securities while limiting market exposure.Correct
Explanation
Relative value strategies exploit mispricing between related instruments, with offsetting long and short positions that reduce market direction exposure. Directional forecasts characterize macro or directional equity funds. Distressed investing is an event-driven strategy.
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