Long/Short Fund

AAA

DEFINITION of 'Long/Short Fund'

A type of mutual fund that mimics some of the trading strategies typically employed by a hedge fund. Unlike most mutual funds, long/short funds use leverage, derivatives and short positions in an attempt to maximize total returns, regardless of market conditions. The amount of leverage used and the number of derivatives and short positions that long/short funds may contain are limited by law. These funds invest primarily in stocks.

INVESTOPEDIA EXPLAINS 'Long/Short Fund'

Long/short funds are the mutual fund industry's attempt to bring some of the advantages of a hedge fund to the common investor. Most long/short funds feature higher liquidity than hedge funds, no lock-in period and lower fees. However, they still have higher fees and less liquidity than most mutual funds. Furthermore, unlike most mutual funds, long/short funds usually require a minimum investment of more than $1,000, although some do not. Long/short funds aren't allowed to use as many derivative and short positions nor as much leverage as hedge funds, but they do provide some diversification to the average investor in down markets.

RELATED TERMS
  1. Hedge-Like Mutual Fund

    A mutual fund that adopts an alternative investment strategy, ...
  2. Hedge Fund

    An aggressively managed portfolio of investments that uses advanced ...
  3. Leverage

    1. The use of various financial instruments or borrowed capital, ...
  4. Liquidity

    1. The degree to which an asset or security can be bought or ...
  5. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  6. Derivative

    A security whose price is dependent upon or derived from one ...
Related Articles
  1. Taking A Look Behind Hedge Funds
    Mutual Funds & ETFs

    Taking A Look Behind Hedge Funds

  2. A Brief History Of The Hedge Fund
    Options & Futures

    A Brief History Of The Hedge Fund

  3. Hedge Funds: Higher Returns Or Just ...
    Options & Futures

    Hedge Funds: Higher Returns Or Just ...

  4. Hedge Funds Hunt For Upside, Regardless ...
    Options & Futures

    Hedge Funds Hunt For Upside, Regardless ...

comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center