• Wealthy private individuals
• Institutional investors
• Financial institutions
• Funds of funds

Up capture indicator is fund’s average return divided by benchmark average return, considering only periods when benchmark was up. Bigger is better.

Down capture indicator is fund average/benchmark average considering only periods when benchmark was down. Smaller is better.

Up number ratio is number of periods fund and benchmark were up, divided by number of periods benchmark were up. Bigger is better.

Down number ratio is number of periods fund and benchmark were down, divided by number of periods benchmark was down. Smaller is better.

Up percentage ratio is the percentage of periods the fund outperformed when the benchmark was up. Bigger is better.

Down percentage ratio is the percentage of periods the fund outperformed when benchmark was down. Bigger is better.

Percent gain ratio is number of fund up periods over number of benchmark up periods. Bigger is better.

Ratio of negative months over total months is a good downside risk indicator but ignores absolute size of positive and negative returns.

Individual drawdown is any losing period during an investment record.

Maximum drawdown is the largest percentage loss an investor could have realized during a period. It measures the pain an investor may feel if the loss recurs. Comparisons must be made using similar time periods, as maximum drawdown will be greater as measurement frequency interval becomes smaller. It will also be greater for a longer time series, potentially disadvantaging managers with longer track records.

Uninterrupted drawdown calculates the length and severity of an uninterrupted drop.

Recovery time or drawdown duration is the time taken to recover to the prior level.

It is calculated as T/6[skewness^2 + (kurtosis^2/4)]

If the Bera-Jarque statistic is less than 5.99, the returns are considered normally distributed.

The distressed securities style focuses on debt and equity of companies experiencing or expecting to experience financial difficulty. It includes reorganization, bankruptcy and distressed sales. Securities often trade at deep discounts due to regulatory restrictions on some investors, lack of research, low liquidity and excessive investor fear. Investors accept credit and liquidity risk in hope of long-term turnaround. Sometimes managers hedge with options, sometimes take active roles in restructuring the company.

The merger arbitrage style shorts the acquirer and goes long the acquiree to capture the spread.

Event-driven multi-strategy funds draw on multiple themes including merger/risk arbitrage, distressed securities and other themes such as Reg D private transactions

Leptokurtosis, or positive excess kurtosis,  indicates a distribution that is more peaked at the center and has fatter than normal tails.

Platykurtosis, or negative excess kurtosis, indicates a relatively flatter top and thinner tails.

• Global
• Regional or industry focus
• Dedicated short bias
• Emerging market
• Market timing

The short selling style acts inversely to market direction.

The emerging markets style invests in all types of securities (equity, fixed, sovereign) in emerging markets. It tends to be more volatile and funds are often long-only due to local market restrictions on short selling.

The market timer style varies long and short exposure in reaction to market conditions.

Zero skewness indicates a symmetrical distribution. Investors generally prefer higher skewness and avoid negative skewness if possible.

The global macro strategy makes leveraged, directional, opportunistic investments in global currency, equity, bond and commodity markets on a discretionary basis. Managers usually rely on a top-down approach and base trading views on fundamental economic, political and market factors. They seek high returns with less concern over risk. Success is heavily dependent upon manager skill.

Discretionary traders base decisions on fundamental and technical analysis, and their experience. Systematic traders believe future price movements can be anticipated by quantitative analysis of historical price movements.