Understanding Equity Hedge Strategies

Medium Hedge Fund Strategies Equity Hedge

Consider the following scenario involving a hedge fund that specializes in equity hedge strategies. The fund utilizes a long/short equity strategy to exploit relative mispricings in the equity markets. In their latest quarterly report, the fund disclosed a net long exposure of 70% and a short exposure of 30%. The fund manager believes that despite overall market volatility, certain sectors are poised for growth while others are likely to underperform.

Given this strategy, answer the following question:

The hedge fund is adopting a market-neutral strategy by balancing its long and short positions.

The fund is likely to benefit from market-wide downturns due to its overall long position.

The hedge fund's approach suggests a bullish outlook on certain sectors while hedging against potential downturns.

Hint

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