The Big Bucks Hedge Fund uses simultaneous long and short positions in equity with a net beta close to zero. Which of the following statements about Big Bucks is (are) CORRECT?
It uses a directional strategy.
It uses a relative value hedge fund.
This fund is exposed to idiosyncratic risks.
A. II and III. B. I and III. C. II only. D. I and II.
This fund has a beta close to zero, so is not a directional fund. Funds that have betas close to zero are relative value funds (in this case, equity market neutral). All hedge funds are exposed to idiosyncratic risks.
