Answer-first summary for fast verification
Answer: Market-neutral funds, which aim to balance long and short positions to minimize market risk and achieve a beta near zero.
**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.
Author: LeetQuiz Editorial Team
Ultimate access to all questions.
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.
No comments yet.