“Market neutral” refers to an investment strategy that seeks to generate returns without taking directional bets on the overall direction of the market. The goal of a market neutral strategy is to profit from the relative performance of different securities or asset classes, while minimizing exposure to overall market movements.
In a market neutral strategy, the investor takes both long and short positions in a portfolio of securities or asset classes. The long and short positions are designed to offset each other, so that the overall exposure to the market is minimized. This allows the investor to profit from the relative performance of different securities or asset classes, while reducing the impact of market movements on the portfolio.
Market neutral strategies can be executed using a variety of financial instruments, including stocks, options, futures contracts, and ETFs. The strategy is often used by hedge funds and other institutional investors who seek to generate returns in a variety of market conditions.
