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U.S. stock markets have been volatile for a pretty long stretch. Given the prevailing erratic economic conditions, a market-neutral fund is particularly relevant for protecting one’s invested capital. This type of fund is designed to provide stable returns at relatively lower levels of risk regardless of market direction.
Market-neutral funds aim to adopt a precision approach by shorting 50% of their assets and holding 50% long. This method seeks to identify pairs of assets whose price movements are related. The fund goes long on the outperforming asset and shorts the underperformer.
Say, for instance, you take a $1 million long position in Pfizer and a $1 million short position in Wyeth, both large pharmaceutical companies. If pharmaceutical stocks fall, you will lose because of your long position in Pfizer but gain from your short position in Wyeth.
Below, we share with you three top-rated market-neutral mutual funds, viz. Hussman Strategic Growth Fund (HSGFX - Free Report) , AQR Diversified Arbitrage Fund (ADANX - Free Report) , and Calamos Market Neutral Income Fund (CVSIX - Free Report) . Each has earned a Zacks Mutual Fund Rank #1(Strong Buy) and we expect the fund to outperform its peers in the future. To view the Zacks Rank and past performance of all market-neutral mutual funds, investors can click here to see the complete list of funds.
Hussman Strategic Growth Fund invests most of its net assets in common stocks according to the fund’s investment advisor’s choice. HSGFX advisors may also invest in options and index futures and use other hedging strategies to adjust the risk during unfavorable market conditions.
Hussman Strategic Growth Fund has three-year annualized returns of 2.6%. As of the end of June 2023, HSGFX held 258 issues, with 1.2% of its assets invested in Canadian Solar.
AQR Diversified Arbitrage Fund seeks long-term positive returns by investing in well-diversified portfolio equity, convertible securities, debt securities, loans, warrants, derivative instruments like futures, forwards, and options along with credit default swaps and credit default index swaps. ADANX advisors seek to outperform the ICE BofA ML US 3-Month Treasury Bill Index after expenses.
AQR Diversified Arbitrage Fund has a three-year annualized return of 5.7%. ADANX has an expense ratio of 1.45% compared with the category average of 1.79%.
Calamos Market Neutral Income Fund seeks high current income in line with its principles by investing in equities, convertible securities of U.S. companies irrespective of their market capitalization and options and high-yield, fixed-income securities. CVSIX advisors also use short selling and swaps to enhance income and hedge against market risk.
Calamos Market Neutral Income Fund has returned 2.9% in the past three years. John P. Calamos has been the fund manager of CVSIX since September 1990.
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3 Top-Ranked Market Neutral Funds to Hedge Risk
U.S. stock markets have been volatile for a pretty long stretch. Given the prevailing erratic economic conditions, a market-neutral fund is particularly relevant for protecting one’s invested capital. This type of fund is designed to provide stable returns at relatively lower levels of risk regardless of market direction.
Market-neutral funds aim to adopt a precision approach by shorting 50% of their assets and holding 50% long. This method seeks to identify pairs of assets whose price movements are related. The fund goes long on the outperforming asset and shorts the underperformer.
Say, for instance, you take a $1 million long position in Pfizer and a $1 million short position in Wyeth, both large pharmaceutical companies. If pharmaceutical stocks fall, you will lose because of your long position in Pfizer but gain from your short position in Wyeth.
Below, we share with you three top-rated market-neutral mutual funds, viz. Hussman Strategic Growth Fund (HSGFX - Free Report) , AQR Diversified Arbitrage Fund (ADANX - Free Report) , and Calamos Market Neutral Income Fund (CVSIX - Free Report) . Each has earned a Zacks Mutual Fund Rank #1(Strong Buy) and we expect the fund to outperform its peers in the future. To view the Zacks Rank and past performance of all market-neutral mutual funds, investors can click here to see the complete list of funds.
Hussman Strategic Growth Fund invests most of its net assets in common stocks according to the fund’s investment advisor’s choice. HSGFX advisors may also invest in options and index futures and use other hedging strategies to adjust the risk during unfavorable market conditions.
Hussman Strategic Growth Fund has three-year annualized returns of 2.6%. As of the end of June 2023, HSGFX held 258 issues, with 1.2% of its assets invested in Canadian Solar.
AQR Diversified Arbitrage Fund seeks long-term positive returns by investing in well-diversified portfolio equity, convertible securities, debt securities, loans, warrants, derivative instruments like futures, forwards, and options along with credit default swaps and credit default index swaps. ADANX advisors seek to outperform the ICE BofA ML US 3-Month Treasury Bill Index after expenses.
AQR Diversified Arbitrage Fund has a three-year annualized return of 5.7%. ADANX has an expense ratio of 1.45% compared with the category average of 1.79%.
Calamos Market Neutral Income Fund seeks high current income in line with its principles by investing in equities, convertible securities of U.S. companies irrespective of their market capitalization and options and high-yield, fixed-income securities. CVSIX advisors also use short selling and swaps to enhance income and hedge against market risk.
Calamos Market Neutral Income Fund has returned 2.9% in the past three years. John P. Calamos has been the fund manager of CVSIX since September 1990.
To view the Zacks Rank and past performance of all market-neutral mutual funds, investors can click here to see the complete list of funds.
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