Look for a structural edge | stockbee

7/17/2009

Look for a structural edge

World stock markets36 Trillion
Overall US Stock market18 Trillion
Mutual funds US13 Trillion
Pension funds US15 Trillion
Hedge funds US1-2 Trillion

The strategies of the big players influence the market. Understanding what strategies they use and why is the key to finding a structural edge in the market for small speculators like us.

What strategies hedge funds use:


  • Dedicated Short Bias
  • Emerging Markets
  • Equity Market Neutral
  • Event Driven
  • Distressed
  • Arbitrage
  • Global Macro
  • Long/Short Equity
  • Managed Futures
  • High Frequency Trading

What strategies mutual funds use

  1. Value
  2. Growth

More money is allocated to value than growth. If you study mutual fund industry, most start out as growth funds but once size of assets increases they become value funds.

What Strategies pension funds use:

  • value
  • growth
  • fixed income
  • commodities
One should look for a structural edge in the market and not ephemeral edge. There are many traders who spend considerable time developing ephemeral edge. Structural edges are enduring and rooted in the behavior of the market and large players in the market.

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