Kingdom Ridge Capital is what professional investors would call a long/short hedge fund. At a high level, those who are not an asset management industry insider may think hedge funds are all about trading. To be fair, there have historically been firms that have acted as “trading” shops. However, there are hedge funds that also consider a long-time horizon. Kingdom Ridge tends to invest over the medium to long term but at times also engages in short-term trading.
Besides being confused about hedge funds overall, people often wonder what a long/short hedge fund like Kingdom Ridge actually is. In simple terms “long/short” is an investment insider’s shorthand term that describes an investment strategy where an investor a) tries to earn a return by owning (also known as being “long”) securities while also b) attempting to make money by selling borrowed shares of stock and then replacing those borrowed shares at a later time with stock that were purchased at a lower price (a practice that is called “shorting”). In theory, a firm like Kingdom Ridge Capital executing such a strategy “hedges” an investor’s risk as it allows them to make money in markets that are rising and falling. In a market that is moving strongly higher, an investor may be trading off the higher returns that could be found in a long-only fund, but over the long run the short book should pay dividends in a declining market. Because of the level of risk associated with shorting stocks, funds like Kingdom
Ridge Capital may only invest money that is raised from qualified investors such as endowments, foundations and pensions.
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