Long/Short Fund

A Long/Short Fund refers to either a mutual fund, Exchange Traded Fund (ETF), hedge or quant fund.  As the name implies, the long/short fund uses long/short strategies in an attempt to improve risk adjusted returns.

Long/Short Fund

A Long/Short Fund refers to either a mutual fund, Exchange Traded Fund (ETF), hedge or quant fund.  As the name implies, the long/short fund uses long/short strategies in an attempt to improve risk adjusted returns.

 

Application of Long/Short Fund

A Long/Short Fund holds long positions in some equities (or other asset) and short positions in others.  This strategy is an attempt to minimize risk while still providing equity appreciation provided that the long positions outperform the short positions.  Long/short funds aren't allowed to use as many derivative and short positions nor as much leverage as hedge funds. 



Most long/short funds have no lock in period, lower fees and tend to have relatively high liquidity.  Nonetheless, they generally have less liquidity and higher fees than most other mutual funds.

Long/short funds fall into the "alternative investment" category.  They generally provide some downside protection in bear markets and offer a level of diversification to the average investor.  The correlation to the stock market tends to be low.



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