Multistrategy

Multistrategy refers to an investment approach that combines several distinct trading or investment strategies within a single portfolio or fund. By pooling multiple strategies, a multistrategy seeks to diversify sources of return and reduce dependence on any single market regime or beta driver.

Common implementations allocate capital across strategies that may span equities, fixed income, currencies, commodities, and other assets. Strategies can be discretionary or systematic and may include long/short equity, event-driven, credit, macro, arbitrage, and quantitative approaches. Some funds mix multiple sub-strategies under a single risk framework and adjust exposure through risk budgeting or capital allocation rules.

Rationale and risks: The main advantage is improved diversification and the potential for more stable performance across different market conditions, as well as access to strategies that may have low correlation with each other. However, multistrategy portfolios can be complex to run and evaluate, with higher fees, potential for cross-strategy risk, opacity of exposures, liquidity mismatches, and increased leverage risk.

History and use: Multistrategy structures gained prominence in hedge funds and institutional investing from the 1990s onward as a way to pursue attractive risk-adjusted returns. Performance depends on manager selection, diversification quality, and governance. Evaluation metrics often focus on aggregate volatility, drawdown, correlation to broad markets, and risk-adjusted returns such as the Sharpe ratio.