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E

Early redemption policy

Charge levied to an investor that redeems units of a fund before a specified date. Early redemption penalties discourage short-term trading in a fund.

Efficient frontier

An efficient frontier is a line of Pareto optimal portfolios created from a risk-return graph that plots standard deviation (risk) on the x-axis and return on the y-axis. These optimal portfolios along the curve have the highest return for a given level of risk or the lowest risk for a given level of return. Points above the curve are theoretically impossible whereas points below the curve are not efficient.

Efficient market hypothesis

The efficient market hypothesis is a controversial and often-disputed theory that states that fundamental and / or technical analysis cannot lead to excess market returns because markets are fully efficient and as such incorporate all relevant information about every security.

Emerging markets

An investment strategy where the manager focuses on investing (mostly on the long side) in the securities of companies from emerging or developing countries. Investing in emerging markets can be very volatile, and may also involve currency risk, political risk, and liquidity risk.

Equity hedge investing

See Long/Short Equity

Equity market neutral

Funds employing this strategy structure portfolios with minimal market exposure by having the same dollar and beta-adjusted long and short exposure. Having little or no correlation to the marketplace, they are insulated ("neutralized") against the market ups and downs that otherwise determine much of a portfolio's return.

Event-driven investing

An investment strategy seeking to identify and exploit pricing inefficiencies that have been caused by corporate events, such as a mergers, spin-offs, or bankruptcies. Event-Driven strategies involve attempting to predict the outcome of a particular transaction as well as the optimal time at which to commit capital to it. The uncertainty about the outcome of these events creates investment opportunities for managers who can correctly anticipate their outcomes. Merger Arbitrage and Distressed Securities are the main event-driven strategies.

Execution risk

Execution risk is the danger that a deal cannot be completed because no one can be found to meet the price and/or other terms being sought.

Exposure

Exposure (or "market exposure") is the percentage of a fund's holdings that is invested in the market.