Glossary · Investment companies
Replicating hedge basket
A replicating hedge basket is a set of short positions in an investment company's listed holdings, sized in proportion to each holding's value per share. Bought together with the company's shares, it leaves the discount and the unlisted holdings as the remaining exposure.
Where a holding is itself an investment company, as when one owns shares in another, the basket should short that company's own holdings instead. Shorting the inner company directly would leave its discount inside the hedge.
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