Dedicated Short Bias

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. Net Long

    A condition in which an investor has more long positions than ...
  2. Dedication Strategy

    A method by which the anticipated returns on an investment portfolio ...
  3. Weak Shorts

    Traders or investors who hold a short position in a stock or ...
  4. Short Hedge

    An investment strategy that is focused on mitigating a risk that ...
  5. Bias

    Biases are human tendencies that lead us to follow a particular ...
  6. 130/30 Mutual Fund

    A mutual fund that has long positions and short positions in ...
Related Articles
  1. ETFs & Mutual Funds

    Using Short ETFs to Battle a Down Market

    Instead of selling your stocks to get gains, consider a short selling strategy, specifically one that uses short ETFs that help manage the risk.
  2. Investing

    Short Selling: Introduction

    Have you ever been absolutely sure that a stock was going to decline and wanted to profit from its regrettable demise? Have you ever wished that you could see your portfolio increase in value ...
  3. Managing Wealth

    Behavioral Bias - Cognitive Vs. Emotional Bias In Investing

    We all have biases. The key to better investing is to identify those biases and create rules to minimize their effect.
  4. Trading

    Short Selling Risk Can Be Similar To Buying Long

    If more people understood short selling, it would invoke less fear, which could lead to a more balanced market.
  5. Trading

    How To Protect A Short Position With Options (FB, AAPL)

    Short selling can be a risky endeavor, but the inherent risk of a short position can be mitigated significantly through the use of options.
  6. Trading

    Rules and Strategies For Profitable Short Selling

    Short sales work well in bull and bear markets but strict entry and risk management rules are required to overcome the threat of short squeezes.
  7. ETFs & Mutual Funds

    Difference Between Short Selling And Put Options

    Short selling and put options are essentially bearish strategies used to speculate on a potential decline in a security or index, or to hedge downside risk in a portfolio or specific stock.
  8. ETFs & Mutual Funds

    The Multiple Strategies Of Hedge Funds

    Hedge fund investors or potential investors need to understand how much risk hedge funds take in making money.
  9. ETFs & Mutual Funds

    The 3 Best Downside Protection Equity Mutual Funds

    Learn how it is possible to profit in a bear market by owning the correct selection of mutual funds that provide downside protection and opportunity.
  10. ETFs & Mutual Funds

    4 Reasons to Still Consider Traditional 2 & 20 Hedge Funds

    Find out why traditional 2 & 20 hedge funds are still worth considering as an investment, even though they have underperformed for the last several years.
RELATED FAQS
  1. When short selling, how long should you hold on to a short?

    Explore the reasons for short selling and the various factors that influence how long an investor may wish to maintain a ... Read Answer >>
  2. What is the difference between a short squeeze and short covering?

    Learn about short covering and short squeezes, the difference them and what causes short squeezes. Read Answer >>
  3. What is the difference between a short position and a short sale?

    Learn how short selling and short positioning are different, specifically in regards to the nature of the commodity being ... Read Answer >>
  4. What's the difference between a long and short position in the market?

    Understand long and short positions for stocks and option contracts; combine long and short positions for added leverage ... Read Answer >>
  5. How is the short interest of a company related to a short squeeze of a company?

    Learn about the short interest and short squeeze, how to determine if a stock is a short squeeze candidate and how short ... Read Answer >>
  6. Which of the following would be considered a short hedge ...

    The correct answer is a) Long the commodity and short the futures Read Answer >>
Hot Definitions
  1. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  2. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  3. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  4. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  5. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  6. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
Trading Center