Which would best describe the strategy, "Equity market neutral" or "Hedged equity strategies"?

CFA Level III Alternative Investments
#1

Hi,

I think the answer is C (in this case, Long/Short strategy in "C: Hedged equity strategies?), but am still thinking whether the answer B would be also possible because the fund manager basically tries to keep the equity position neutral.

I’d appreciate it if anyone could tell which one should be the answer and the reason.

Thank you in advance!

In a meeting with a client, a hedge fund manager states that the fund buys undervalued stocks and shorts stocks that are overvalued. The portfolio currently is long $240 million and short $500 million in equities in equities.
The fund, when it cannot find attractive long or shorts, will also invest in short-term Treasury bills. The T-bill position today is $260 million. Based on the description, this hedge fund is BEST classified as:

A. Global macro strategies.
B. Equity market neutral.
C. Hedged equity strategies.

#2

There’s no indication that an objective is to have a beta of zero.

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#3

Your understanding is correct.

The key of Equity market neutral strategy is to achieve a beta of zero.

If the question says that they long and short similar stocks, that would be the market neutral strategy.

In this case, there is no indication just like S2000 said. So the answer is C

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#4

Thank you, S2000magician and rastaipast. I got it now.

#5

Good to hear.

You’re quite welcome.