A Review of Hedge Fund Strategies in Global Financial Markets

Abstract

This paper examines the complexity of hedge fund strategies within the global economy and highlights the ongoing need to better understand their operations, particularly during periods of financial instability. Hedge funds are distinguished by their flexible investment mandates, use of advanced financial instruments, and active risk-taking approaches, which can significantly influence market dynamics. The paper discusses the classification of hedge funds based on factors such as investment style, geographic focus, and trading strategies, emphasizing the diverse nature of the industry. It also analyses key hedge fund strategies, including arbitrage, event-driven, distressed, and merger strategies, outlining their objectives and associated risks. The conclusion underscores the importance of increased transparency, stronger regulatory oversight, and improved disclosure to mitigate systemic risks. Furthermore, it calls for continued research to enhance understanding of hedge fund behaviour and their impact on global financial markets, supporting more informed investment and policy decisions.