Loading the player...

DEFINITION of '130/30 Mutual Fund'

A mutual fund that has long positions and short positions in its portfolio. Specifically, in a 130/30 mutual fund, the fund is long 100\% of its assets, and in addition it shorts 30\% of the value portfolio and uses the cash received in the short sale to invest long in more assets. So in total, the fund is 130\% in the long portfolio and 30\% in the short portfolio, hence 130/30.

BREAKING DOWN '130/30 Mutual Fund'

For example, if the fund is worth $100, it would invest the $100 in equity and then would short $30 worth of equity. In a short sale, the fund receives $30 cash and uses that $30 to invest long in more assets. So the fund is now long $130 and short $30. This is a popular strategy because it allows the manager to invest $160 for every $100 the investor puts into the fund.

RELATED TERMS
  1. 130-30 Strategy

    A strategy that uses financial leverage by shorting poor performing ...
  2. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  3. Net Long

    A condition in which an investor has more long positions than ...
  4. Mutual Fund Liquidity Ratio

    A ratio published monthly by the Investment Company Institute ...
  5. Equity Fund

    A mutual fund that invests principally in stocks. It can be actively ...
  6. Asset Size

    The total market value of the securities in a mutual fund's portfolio. ...
Related Articles
  1. Financial Advisor

    Advising FAs: Explaining Mutual Funds to a Client

    More than 80 million people, or half of the households in America, invest in mutual funds. No matter what type of investor you are, there is bound to be a mutual fund that fits your style.
  2. Financial Advisor

    A Mutual Funds Guide for Young Investors

    Learn how mutual funds work, why they are so popular and how younger investors can get started by putting mutual funds in their IRAs or 401(k)s.
  3. Financial Advisor

    Mutual Funds: How Many is Too Many? (VTSMX, VBMFX)

    How many mutual funds are too many when it comes to a well diversified portfolio?
  4. Financial Advisor

    How to Rate Your Mutual Fund Manager

    What to really look for when you're deciding on a mutual fund.
  5. Investing

    How liquid are Fidelity mutual funds?

    Review the liquidity features of mutual fund shares and an overview of Fidelity mutual funds. Most investors look for convenient access to their investments.
  6. Investing

    Mutual Funds: Does Size Really Matter?

    The growth of mutual funds isn't always cause for celebration. Read on to find out why.
  7. Investing

    Mutual Funds Are Awesome - Except When They're Not

    This investment is very popular, but that doesn't mean it comes without risk.
  8. Financial Advisor

    5 Characteristics of Strong Mutual Fund Shares

    Discover some of the basic characteristics shared by good mutual funds that investors can use to help them in selecting funds.
  9. Investing

    When To Sell A Mutual Fund

    Unhappy with your mutual fund's returns and thinking of investing elsewhere? Read this article first.
RELATED FAQS
  1. What is a long-short mutual fund?

    A Long-Short Fund is a mutual fund that holds investments long and in addition it sells securities it does not own (short). ... Read Answer >>
  2. Why is it that when investors realize returns on a mutual fund, its price tends to ...

    Mutual funds have been in existence since 1924, when the first open-ended mutual fund was created. Since then, the market ... Read Answer >>
  3. How do I calculate the loan-to-value ratio using Excel?

    Learn what a mutual fund and a money market fund are, and understand the differences between each and how they serve various ... Read Answer >>
  4. How do you find out the price of a mutual fund?

    The easiest way to find out the price of a mutual fund is to look at its net asset value (NAV). NAV is the total value of ... Read Answer >>
Hot Definitions
  1. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  2. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  3. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  4. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  5. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  6. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
Trading Center