Blue Ocean Red Ocean – Hedge Fund Strategy

By following the Blue Ocean Red Ocean Strategy we are able to pick better deals and markets for our hedge fund.

We don’t want to try and grab market share from super competitive markets with competitive giants. We want to be CATEGORY KINGS!

Recently I have been going over a lot of Fund Administration and Structure on the blog,

Probably because I’m currently starting a Real Estate Fund so it’s fresh on my mind.

So I thought it would be good for me to write about something a little different…


The strategy I want to go over is called Blue Ocean Red Ocean (or Red Ocean Blue Ocean).

This idea comes from a couple of books that I really love:

  1. Blue Ocean Strategy
  2. Play Bigger

I have seen this strategy work with funds and in business altogether and want to share some key points on it.

The Strategy

Markets can be considered as oceans.

Some of them are Red Oceans and some are Blue Oceans.

A Red Ocean is a market dominated by category kings,

Which take over about 80% of the market share in that space.

Typically Red Oceans have 1 or 2 of these kings fighting over market share.

It’s called a Red Ocean because these markets are bloody

You have these massive sharks fighting and taking over while the remaining 20% of the share is just scraps left for smaller companies.

The strategy for Red Ocean Blue Ocean suggests that you SHOULD NOT try to go and capture market share in dominated markets…

We don’t want to fight for 1% market share,

We want to be Category Kings!

Red Ocean Example

Google owns 89% of all search inquiries on the internet…

They are a Category King in that Red Ocean.

But there was another company you may have heard of called Microsoft who thought,

“We should go grab some of the Internet Search market share.”

So in 2009 they created a search engine called…


And it completely flopped.

This was because BING tried to be something better… not something new.

Which some could argue at the time it was faster or maybe a little bit better,

But that didn’t matter.

It was basically the same product as Google.

Existing customers didn’t care enough to switch for something that was relatively the same.

And today BING still only has 4.5% market share.

This shows that even giant corporations struggle to grab market share from other whales and so for us minnows out there it is better to look for Blue Oceans.

Don’t Compete With Whales

Blue Oceans are markets with little to no category king and lots of market share.

There was another company who saw the same thing as Microsoft but decided to create something NEW… not better.

This company was called YouTube.

And instead of tackling all internet search they decided to create their own Blue Ocean on a website solely based on optimizing video search.

Eventually they were acquired by Google and we all know how that has played out in today’s world.

Youtube is now a Category King!

There was also another small company called Amazon.

Their dream was to be a leader in all of online retail but that’s not where they started.

At first, Amazon focused on being a leader in the online book selling space.

Eventually they became a Category King there and then continued to move forward into different online retail categories.

Today Amazon is by far the largest online retailer in the world,

But they might have not been if they tried to go all in at first.


When looking into where you should invest with you fund you should try to target Blue Oceans.

Sure… some traders are good at navigating Red Oceans but most of them will fail eventually.

Our funds are too precious to risk and it’s much easier to sleep at night knowing you are diving into a Blue Ocean.

Blue Oceans may be harder to come by but they are well worth the search.

If you are interested in help finding or creating Blue Oceans of your own check out my course!

I’d be glad to help!

Take Care,

Bridger Pennington

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DISCLAIMER: This content is for educational and informational purposes only. It is not to be taken as tax, financial, or legal advice. You should always consult a legal professional before taking action. Furthermore, this is not a recommendation to buy or sell any security. The content is solely just the opinion of the authors.

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