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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 the 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 returns for strategies and indices that are relevant for performance measurements. Gradually, we will add additional categories to the database. For various reasons, the CTA category is the largest category, both due to a large so-called graveyard (i.e. discontinued strategies) and a relatively high degree of transparency. Lately, our collection of crypto strategies have grown rapidly.

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

  • Asset Allocation: Strategies that allocate across global asset classes, sometimes through a long-only approach.
  • Crypto: These strategies do not yet have an in-depth classification.
  • CTA : 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.
  • Event-Driven: Strategies that are focused on specific corporate events, such as mergers, distressed debt, or trading through corporate restructurings.
  • Equity Long/Short: includes a variety of strategies, including stock-picking, but not market-neutral, event, and arbitrage strategies.
  • 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 in trading fixed income-related strategies.
  • Hedge Fund: category is generic and captures hedge funds that are not covered by other classification schemes.
  • Index: is a category representing market indices or hedge fund indices. All of these are passive and may not be investable. This primarly represent the NilssonHedge indices.
  • Infrastructure: Funds that have exposure to various types of infrastructure (e.g. roads, bridges, utilities etc).
  • Long Only: represents long-biased strategies, here we capture managers that trade enhanced indices or 130/30 equity portfolios.
  • 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.
  • Private Equity: Listed private equity vehicles.
  • Risk Premia: captures strategies and managers that exploit well-documented anomalies in markets, carry, low volatility to mention a few.