An inside view of what makes market neutral strategies tick and how they can be implemented Market neutral strategies have gained attention for their potential to deliver positive returns regardless of the direction of underlying markets. As these strategies have built a record of good performance in recent years, their benefits have become apparent. Market Neutral Strategies draws on the wisdom and experience of professional practitioners to describe strategies that are being utilized by some of today's leading institutional investors. This book provides readers with an insider's view of what makes these strategies work and how they can be implemented successfully. Topics covered include long-short equity and convertibles, fixed income and merger arbitrage; the tax and ERISA implications of market neutral investing; and the failure of two notorious "market neutral" ventures, Askin Capital Management and Long-Term Capital Management. Bruce I. Jacobs (Florham Park, NJ) and Kenneth N. Levy are cofounders and principals of Jacobs Levy Equity Management, in Florham Park, New Jersey. They are coauthors of Equity Management: Quantitative Analysis for Stock Selection. Bruce Jacobs holds a PhD in finance from the Wharton School of the University of Pennsylvania. He is also the author of Capital Ideas and Market Realities: Option Replication, Investor Behavior, and Stock Market Crashes.
Foreword by Mark Anson
Ch. 1 Introduction by Bruce I. Jacobs and Kenneth N. Levy 1
Ch. 2 Questions and answers about market neutral investing by Jane Buchan and Bruce I. Jacobs and Kenneth N. Levy 9
Ch. 3 Market neutral equity investing by Bruce I. Jacobs and Kenneth N. Levy 21
Ch. 4 Convertible bond hedging by Jane Buchan 47
Ch. 5 Sovereign fixed-income arbitrage by John Maltby 59
Ch. 6 Market neutral strategies with mortgage-backed securities by George E. Hall and Seth C. Fischoff 85
Ch. 7 Merger arbitrage by Daniel S. Och and Tedd C. Pulvino 107
Ch. 8 Transporting alpha by Bruce I. Jacobs and Kenneth N. Levy 131
Ch. 9 A tale of two hedge funds by Bruce I. Jacobs and Kenneth N. Levy 147
Ch. 10 Significant tax considerations for taxable investors in market neutral strategies by Peter E. Pront and John E. Tavss 173
Ch. 11 Tax-exempt organizations and other special categories of investors : tax and ERISA concerns by Peter E. Pront and S. John Ryan 223
Ch. 12 Afterword by Bruce I. Jacobs and Kenneth N. Levy 245
