Hedge Fund Classification

NilssonHedge works with a classification framework that sorts managers into Type, Style, Strategy and Sector attributes. The classification is not designed to be an absolute truth, but rather indicative of what is driving the underlying returns. There are many ways of classifying hedge fund strategies. In most cases, NilssonHedge is responsible for the classification.

We use a supervised learning strategy to map strategies, based on description of the strategy.

We commonly use CTA, Hedge Fund, Equity Long/Short, Asset Allocation, Risk Premia, Fixed Income, Crypto, Long-Only and Index. While not all of these are hedge fund strategies, we have also chosen to report return for strategies and indices that are relevant for performance measurements.

CTA is our category for Managed Futures, Global Macro, Commodity managers and related strategies. For a more in-depth classification taxonomy of the CTA taxonomy, please click here.

This classification is used in the NilssonReport and is subject to change.

Equity Long/Short includes a variety of strategies, including stock-picking, but not market neutral, event and arbitrage strategies.

Market Neutral: A strategy that seeks to “neutralize” unwanted market or factor exposure. Typically, this can be viewed as a pure alpha version of a Long/Short equity program.

Event Driven: Strategies that are focused on specific corporate events, such as mergers, distressed debt or trading through corporate restructurings.

Fixed Income hedge funds are classified depending on the most dominant type of securities that the fund trades. Thus, these are hedge funds that are primarily engaged trading fixed income related strategies.

Asset Allocation is strategies that allocates across global asset classes, sometimes through a long-only approach.

Risk Premia captures strategies and managers that exploit well-documented anomalies in markets, carry, low volatility to mention a few.

Long Only represent long biased strategies, here we capture managers that trade enhanced indices or 130/30 equity portfolios.

The Hedge Fund category is generic and captures hedge fund that are not covered by other classification schemes.

Crypto trading strategies do not yet have have a in-depth classification.

Index is a category representing market indices or hedge fund indices. All of these are passive and may not be investable.