[Verse 1]
In the world of hedge funds there's so much to know
Different strategies that make the money flow
Long short equity buys the good and sells the bad
Market neutral keeps it balanced, risk ain't quite so mad
Event driven waits for mergers and distressed debt
While relative value finds the spreads that haven't met
[Chorus]
Hedge funds, hedge funds, strategies galore
Two and twenty fees they charge and maybe more
Management and incentive, that's the way they play
High water marks and hurdles keep the clawbacks at bay
Hedge funds, hedge funds, alternative and free
But buyer beware of what you cannot see
[Verse 2]
Global macro bets on currencies and rates
Managed futures follow trends through all the market states
CTA systems trade commodities with care
Fixed income arbitrage finds value everywhere
Convertible bonds can swing both ways you see
Merger arb waits patiently for deals to guarantee
[Chorus]
Hedge funds, hedge funds, strategies galore
Two and twenty fees they charge and maybe more
Management and incentive, that's the way they play
High water marks and hurdles keep the clawbacks at bay
Hedge funds, hedge funds, alternative and free
But buyer beware of what you cannot see
[Bridge]
Fund of funds diversifies your risk away
Master feeder structures help the tax display
Side pockets lock up assets that won't trade
Gates control redemptions when investors get afraid
Due diligence is crucial when you pick your manager
Style drift and operational risk can be a real danger
[Verse 3]
Performance measurement's more than just returns
Sharpe ratio has limits, that's what every student learns
Sortino looks at downside, drawdowns show the pain
Appraisal ratio measures if the skill was worth the gain
Survivorship bias makes the indices look bright
Backfill and selection bias don't paint the picture right
[Chorus]
Hedge funds, hedge funds, strategies galore
Two and twenty fees they charge and maybe more
Management and incentive, that's the way they play
High water marks and hurdles keep the clawbacks at bay
Hedge funds, hedge funds, alternative and free
But buyer beware of what you cannot see
[Outro]
From long short to macro, the strategies run deep
With fees and structures complex, your analysis you must keep