Selective hedging is one of the ways used by fund managers to mitigate risk. Certain portfolios come with inherent risks that have to be taken on. A good example of this is a fund that invests in a certain sector the world over. This exposes the fund to risks due to volatility in foreign exchange. To hedge this forward currency contracts can be used. These contracts have to monitor the underlying asset values and roll overs must be done when required.
A fund manager may want to take advantage of interest rate changes in a bond portfolio. They will also seek to have higher immunity to changes in interest rates. One way to do this is to calculate first and second order derivatives of bond values, with respect to their yield to maturity. If we assume the same changes in yields across all bonds in a given portfolio, we can arrive at the portfolio value duration and value convexity by adding up individual bond durations and value convexities. This immunization works for small changes in interest rates.
A more value adding approach is to calculate each bond price variation relevant to each relevant interest rate movement and choose portfolio weights accordingly, to maximize on portfolio gain for the forecast interest rate movement, while immunizing it against other movements.