Hedge funds are known for using a wide range of investment strategies, including leverage, derivatives, short selling, and arbitrage, to seek higher returns. They are typically available only to institutional or accredited investors and are not subject to the same regulatory constraints as mutual funds.

The coefficient of variation (CV) is calculated by dividing the standard deviation by the mean return. It provides a standardized measure of risk per unit of return, making it especially useful for comparing investments with different return and risk profiles. A lower CV indicates better risk-adjusted performance.

A short bias strategy is characterized by a net short position in equity markets, where the fund aims to profit primarily from declines in overvalued stock prices. This differs from a market neutral strategy, which balances long and short positions to minimize market exposure, and a global macro strategy, which focuses on broad economic and geopolitical trends across asset classes.

The notice period is the time frame (often 30 to 90 days) that hedge funds require between receiving a redemption request and fulfilling it. This allows the fund time to manage liquidity and avoid forced asset sales. It is different from a lockup period, which restricts withdrawals for a set duration after the initial investment.

A side letter is a supplementary agreement between a hedge fund and an individual investor that may grant special terms—such as reduced fees or additional reporting—but does not apply to all investors. General fund terms are typically found in the private placement memorandum (PPM) and the partnership agreement, which govern the fund's operations and investor obligations.

Convertible bond arbitrage strategies aim to exploit pricing inefficiencies between a company’s convertible bonds and its equity, typically maintaining a market-neutral position. This involves being long the convertible bond and short the underlying stock to hedge equity risk. In contrast, fundamental value strategies and some merger arbitrage strategies often exhibit a long bias.

Selection bias occurs when the process of including or classifying funds in an index is not applied consistently, leading to distorted comparisons or performance results. Inconsistent assignment of funds to peer groups or strategy categories can skew the analysis of strategy performance. Dropping funds due to reporting cessation relates to survivorship bias, while including funds only after strong performance introduces backfill bias.

The subscription period is the time during which new investors can commit capital to a hedge fund. Once the fund reaches its target size or strategy capacity, it may be closed to new investors. This is unrelated to the notice period, which concerns redemptions.

The notice period is typically 30 to 90 days and gives the hedge fund time to plan liquidity to meet investor redemption requests. It is a standard part of many fund agreements to prevent forced asset sales.

A lockup period restricts investor redemptions for a set time after their investment, allowing the fund manager to invest the capital without concerns over early withdrawals. This is different from the notice period, which applies after redemption is allowed.