Gross Exposure

For an investment fund, gross exposure represents the total amount of money it has in the market. Basically, you're asking the question: how much is at play?

Like, if you have $50 bet on roulette and the wheel is spinning, your gross exposure for that spin is $50. You've got $50 at risk.

Similarly, say a fund has $300 million under management and is holding $50 million in cash, with the rest invested in various positions. In that case, the fund's gross exposure is $250 million.

There's another related measure called net exposure.

Net exposure takes into account that a fund can have contrary positions...ones usually set up as hedges. So of the $250 million the fund has invested, $200 million are long and $50 million are short. If the market goes up, the long position will benefit, but the short position will suffer. And vice versa...a drop in the market will cause the short position to profit, while the fund loses money on the long end.

So unless there's some weird situation that comes up that can hurt both the long and short positions (say, the equivalent of green double-zero coming up on roulette when you've bet on both black and red simultaneously), the long and short positions can't both lose at the same time. While the gross exposure is $250 million, it's safe to say the fund isn't at risk of actually losing $250 million at a given time.

So net exposure in this case would be $150 million. The $200 million it has long...minus the $50 million it has short.