Dedicated Short Bias

AAA

DEFINITION of 'Dedicated Short Bias'

A hedge fund strategy that maintains a net short exposure to the market through a combination of short and long positions. A dedicated short bias investment strategy attempts to capture profits when the market declines, by holding investments that are overall biased to the short side.

BREAKING DOWN 'Dedicated Short Bias'

A dedicated short bias is a directional trading strategy that entails taking a net short position in the market, meaning that a larger proportion of the portfolio is dedicated to short positions, rather than to long positions. Being net short is the opposite of being net long; hedge funds that maintain a net long position are dedicated long bias funds. Dedicated short bias funds include instruments such as ProShares UltraShort 20+ Year Treasury, PowerShares DB US Dollar Index Bearish, and Short Dow30 ProShares.


Prior to the long-term bull market for U.S. equities that took place in the 1980s and 1990s, many hedge funds used a dedicated short strategy, rather than a dedicated short bias strategy. The dedicated short strategy was one that exclusively took short positions. The dedicated short funds were virtually destroyed during the bull market; the dedicated short bias fund emerged and took a more balanced approach.

RELATED TERMS
  1. Hedge Fund

    An aggressively managed portfolio of investments that uses leveraged, ...
  2. Short-Interest Theory

    A theory which holds that a security with a high degree of short ...
  3. Short Covering

    Buying back borrowed securities in order to close an open short ...
  4. Short Squeeze

    A situation in which a heavily shorted stock or commodity moves ...
  5. Naked Shorting

    The illegal practice of short selling shares that have not been ...
  6. Bear

    An investor who believes that a particular security or market ...
Related Articles
  1. Professionals

    Quants: The Rocket Scientists Of Wall Street

    Blend math, finance and computer skills to command a high - and well deserved - salary.
  2. Mutual Funds & ETFs

    Taking A Look Behind Hedge Funds

    Hedge funds can draw returns well above the market average even in a weak economy. Learn about the risks.
  3. Options & Futures

    Hedge Funds Hunt For Upside, Regardless Of The Market

    Hedge funds seek positive absolute returns, and engage in aggressive strategies to make this happen.
  4. Active Trading Fundamentals

    Short Selling Tutorial

    Want to profit on declining stocks? This trading strategy does just that.
  5. Term

    What is a Prime Brokerage?

    A prime brokerage offers special services to certain clients.
  6. Investing Basics

    The 3 Best Investments Bill Ackman Ever Made

    Learn about the three best investments Ackman ever made. Ackman has demonstrated a consistent track record of success in all types of market environments.
  7. Mutual Funds & ETFs

    Top 5 Precious Metals Mutual Funds

    Obtain information and analysis of some of the top-rated and most popular mutual funds that offer investors exposure to the precious metals industry.
  8. Mutual Funds & ETFs

    Top 5 Bear Market Mutual Funds

    Discover five bear market mutual funds that investors can turn to for generating maximum capital appreciation during a bear market.
  9. Active Trading Fundamentals

    This Is How 3 Investors Made a Billion Dollars

    Read about three major hedge fund managers who are worth at least $1 billion and who made large amounts of money on a single trade idea.
  10. Markets

    The Origins of the Chinese Stock Market Collapse

    Learn about some of the reasons for the volatility in the Chinese stock market, including expansion of margin lending and governmental support.
RELATED FAQS
  1. Where do penny stocks trade?

    Generally, penny stocks are traded through the use of the Over the Counter Bulletin Board (OTCBB) and through pink sheets. ... Read Full Answer >>
  2. Where can I buy penny stocks?

    Some penny stocks, those using the definition of trading for less than $5 per share, are traded on regular exchanges such ... Read Full Answer >>
  3. How are American Depository Receipts (ADRs) priced?

    The price of an American depositary receipt (ADR) is determined by the bank or other financial institution that issues it. ... Read Full Answer >>
  4. How are American Depository Receipts (ADRs) exchanged?

    American depositary receipts (ADRs) are bought and sold on regular U.S. stock exchanges, either in the over-the-counter market ... Read Full Answer >>
  5. How can I hedge my portfolio to protect from a decline in the food and beverage sector?

    The food and beverage sector exhibits greater volatility than the broader market and tends to suffer larger-than-average ... Read Full Answer >>
  6. How attractive is the food and beverage sector for a growth investor?

    The food and beverage sector is attractive for a growth investor. The sector's high degree of volatility means it tends to ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  2. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  3. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  4. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  5. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  6. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!