3 Top-Rated Market Neutral Funds For Volatile Markets

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U.S. stock markets have been volatile for a pretty long stretch. Given the prevailing erratic economic conditions, a market-neutral fund is particularly relevant for protecting one’s invested capital. This type of fund is designed to provide stable returns at relatively lower levels of risk regardless of market direction.

Market-neutral funds aim to adopt a precision approach by shorting 50% of their assets and holding 50% long. This method seeks to identify pairs of assets whose price movements are related. The fund goes long on the outperforming asset and shorts the underperformer.

Say, for instance, you take a $1 million long position in Pfizer and a $1 million short position in Wyeth both large pharmaceutical companies. If pharmaceutical stocks fall, you will lose because of your long position in Pfizer but gain from the short position in Wyeth.

Below we share with you three top-rated market-neutral mutual funds viz. Touchstone Ares Credit Opportunities Fund TMAYX, Hussman Strategic Growth Fund HSGFX, and  BlackRock Event Driven Equity Fund Investor A Shares BALPX. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) as we expect the fund to outperform peers in the future. To view the Zacks Rank and past performance of all market-neutral mutual funds, investors can click here to see the complete list of funds.

Touchstone Ares Credit Opportunities Fund seeks capital appreciation by investing most of its net assets along with borrowings if any, in a wide variety of debt securities or other debt instruments. TMAYX invests in U.S. and non-U.S. debt instruments.

Touchstone Ares Credit Opportunities Fund has a three-year annualized return of 6.9%. As of the end of December 2021, TMAYX held 11 issues with 80.45% of its assets invested in Corporate Bonds.

Hussman Strategic Growth Fund typically invests most of its assets in common stocks picked by the investment advisors. HSGFX may use options and index futures, and other hedging strategies, to balance the exposure of the fund’s portfolio during unfavorable market conditions.

Hussman Strategic Growth Fund fund has three-year annualized returns of 2.1%. HSGFX has an expense ratio of 1.23% compared with the category average of 1.92%.

BlackRock Event Driven Equity Fund Investor A Shares seeks capital growth by investing most of its net assets in Equity, Derivative instruments, depositary receipts, and other instruments with similar economic features. BALPX advisors choose to invest in event-driven strategies especially in companies that have announced a material change.

BlackRock Event Driven Equity Fund Investor A Shares has returned 4.1% in the past three years. Mark McKenna is the fund manager of BALPX since May 2015

To view the Zacks Rank and past performance of all Putnam Mutual Funds, investors can click here to see the complete list of funds.

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