Convertible Arbitrage This strategy involves purchasing undervalued convertible securities (bonds, preferred shares, and warrants) and hedging the underlying equity risk by selling short an appropriate amount of common shares of the issuer. Properly executed, this strategy creates a net position which is substantially neutral to the movements in the underlying equity and has an attractive yield. Interest income on the convertible bond, plus the rebate on the short stock, typically provides a positive carry or static return. There are further opportunities for gains independent of market direction as the relative value relationship between the long bond and short stock changes.

Equity Market Neutral This strategy aims at balancing long and short positions in a particular equity market to create a portfolio that, properly structured, has no material net market exposure. Relatively undervalued equities are purchased and relatively overvalued equities are sold short.? Such a strategy can benefit from relative value discrepancies without assuming stock market risk.? This strategy may be driven by fundamental analysis of companies and industry groups, in which case it is referred to as relative value arbitrage; or by historic statistical market price relationships, in which case it is referred to as statistical arbitrage. Relative value or statistical arbitrage that focuses on the relationships between pairs of stocks is also referred to as pairs trading.

Statistical Arbitrage Also called relative value arbitrage or quantitative arbitrage, seek to profit from systematic or occasional pricing discrepancies between securities (including equities, debt, options and futures) that are detected by mathematical models.

Fixed Income Arbitrage This strategy involves the purchase and simultaneous sale of fixed income securities of the same or different issuers, or the arbitrage of bond futures and the underlying bonds.? Fixed income arbitrage strategies include basis trading, credit spread trading, calendar spread trading, yield curve arbitrage, inter-market spread trading, and mortgage-backed securities arbitrage. The net position is typically duration neutral (i.e., no material sensitivity to interest rate changes).? This strategy can therefore capitalize on small relative price aberrations without having to accept interest rate risk. Positions are typically leveraged to create attractive risk-adjusted returns. Because of the lower volatility and risk of bonds, spreads are smaller and higher leverage is applied than for equity-based strategies.

Event Driven Arbitrage Event Driven strategies are characterized by equity oriented investing designed to capture price movement generated by an anticipated corporate event. This category includes the market neutral strategies of merger arbitrage and restructuring arbitrage. Also considered Event Driven are? distressed securities and high yield investing.

Merger Arbitrage Companies buy other companies in the normal course of business.? Often this is done as a merger or stock exchange offer.? At the time a merger offer is announced, the market price of the securities of the acquiring company to be issued in the transaction is typically greater than the market price of the securities of the target company for which they are to be exchanged.? This differential (or spread) will disappear as a successful closing date approaches.? The sub-fund portfolio manager will evaluate the merger offer and if it is determined that the likelihood of consummation of the transaction is high, the sub-fund will purchase the lower priced securities of the target company and sell short the security of the acquiring company in the expectation that it will be covered by the delivery of such security on the closing of the merger.? The profit is the price differential between the two securities, plus any dividends received on the target and the stock borrowing income received on the short acquirer?s stock.? Essentially the same transaction can also be accomplished for cash tender offers.

Distressed/High Yield Securities Hedge funds which invest in distressed securities invest in the debt, equity or trade claims of companies that are in financial distress or bankruptcy.? These securities generally trade at substantial discounts to fair value due to the market?s overreaction to initial news of the distressed situation. High yield hedge funds are similar to distressed securities strategies with the important difference that the debt purchased by the fund is usually not in bankruptcy.? As there tends to be better liquidity and a public market (although often very thin), returns are generally less than for hedge funds which invest in distressed securities, but volatility is also reduced.

Global Macro Global macro strategies involve investing by making leveraged investments on anticipated price movements of stock markets, interest rates, foreign exchange and physical commodities.? Macro managers employ a ?top-down? global approach, and may invest in any market using any instrument to participate in expected market movements.? These movements may result from forecasted shifts in world economies, political fortunes or global supply and demand for resources, both physical and financial.? Exchange-traded and over-the-counter derivatives are often used to magnify these price movements.

Long/Short Equity Hedge Equity hedge strategies involve the combining of long stock holdings with short sales of stock or indices.? Equity long/short fund managers use a number of different technical and fundamental measures to determine security selection.? In contrast to equity market neutral strategies, equity long/short managers will maintain either net long or net short positions. Typically these portfolios are net long biased with a range of net long exposures between 10% and 50% depending on market conditions. On the other hand, some managers will maintain much higher net long exposures (>70% net long) and could be classified in a different category of directional equity.

CTA - Managed Futures Commodity trading advisors (CTAs) use proprietary trading methods and money management techniques to establish market positions in commodity, financial futures and foreign currency markets around the world. This broad geographic exposure allows for participation in market trends and economic events worldwide. Managed futures strategies can be either discretionary or systematic. Discretionary. This class is characterized by proprietary approaches employing technical and/or fundamental analysis in a specific combination.? The strategies are usually either short-term based or consist of spread trading approaches. Systematic. Proprietary computer models generate buy and sell decisions.? The models utilize quantitative analysis of different technical factors.? The most typical examples of this class are trend following or counter-trend models.? The trading is frequently 100% systematic, i.e. no human interference with the trading decisions.