Explanation:
Explanation:
Option A (Incorrect): Short-biased funds generally have a negative beta because they primarily short overvalued securities, leading to a net negative exposure to market movements.
Option B (Correct): Market-neutral funds strive to maintain a balanced portfolio with equal long and short positions, effectively neutralizing market risk and achieving a beta close to zero. This is achieved by hedging against market factors such as size, industry, momentum, and value.
Option C (Incorrect): Fundamental long/short growth funds combine long positions in undervalued companies with short positions in companies facing downward pressure. However, these funds do not necessarily aim for market neutrality and often exhibit a long bias, resulting in a beta that is not close to zero.
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Which of the following hedge fund strategies is most likely to exhibit a beta close to zero?
A
Short-biased funds, which typically have a negative beta due to their focus on shorting overvalued securities.
B
Market-neutral funds, which aim to balance long and short positions to minimize market risk and achieve a beta near zero.
C
Fundamental long/short growth funds, which may not prioritize market neutrality and often end up with a long bias.
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