Market neutral funds might be hedge funds or mutual funds or ETFs whose strategy is not based on bullish or bearish market predictions but instead seeks to be in a position to profit whether the market goes up or down.

Most mutual funds and ETFs out there are inherently bullish — you invest in those funds because you believe or hope that the industry or geographic region or cap-size that they invest in will grow in the future. Some funds offer bears a place to hole-up when the bubble inevitably bursts (or so they think).

Market neutral funds avoid making bets in either direction and instead seek to profit whether the market goes up or down. They do this by using long and short positions that basically balance one another out, but can also use derivative instruments and leverage. This strategy may limit returns, but it can also minimize risks. The strategy generally only seeks returns a few percentage points above the risk-free Treasury rate.

Equity-neutral hedge funds were shown by some research to have the lowest correlation to other hedge funds; they pick certain stocks to go long on in a category, at the discretion of the fund manager and mix their other long/short positions in the category to remain neutrally positioned for overall movement in the category.

Because these will all be uniquely blended according to the beliefs of their fund manager, they are basically market-neutral alternative investments.

What is Market Neutral?
What does Delta mean?