What is a 'Long/Short Fund'

A long/short fund is a type of mutual fund that takes long and short positions in investments typically from a specific market segment. These funds often use several alternative investing techniques such as leverage, derivatives and short positions. Long/short funds may also be referred to as enhanced funds or 130/30 funds.

BREAKING DOWN 'Long/Short Fund'

Long/short funds typically seek to enhance the returns from investing in a specific market segment by actively taking both long and short positions in securities. Long/short funds use varying active management techniques to determine portfolio holdings. They may also use leverage, derivatives and short positions which can increase the risks of the fund as well as the fund’s potential total return.

Long/short funds represent some similarities to hedge funds. They seek to offer investment strategies with greater risk and greater return potential over standard benchmarks. Most long/short funds feature higher liquidity than hedge funds, no lock-in periods and lower fees. However, they still have higher fees and less liquidity than most mutual funds. Long/short funds also may require higher minimum investments than other mutual funds. Long/short funds are more closely regulated than hedge funds therefore they have limitations on the use of leverage and derivatives where hedge funds do not.

Long/short funds can be a good investment for investors seeking targeted index exposure with some active management. Long/short funds also offer the advantage of hedging against changing market environments and other trends that active management can account for.

Top Long/Short Funds

ICON and RiverPark are two of the top performing long/short funds in 2017.

ICON Long/Short Fund

The ICON Long/Short fund had year to date performance of 25.96% as of December 1, 2017. The fund’s investable universe includes all equity securities traded in the U.S. market. It uses the S&P 1500 Index as its benchmark. The fund uses quantitative analysis to identify undervalued and overvalued securities in the investment universe. It then takes long positions in stocks it believes to be undervalued and short positions in stocks it believes to be overvalued.

RiverPark Long/Short Opportunity Fund

The RiverPark Long/Short Opportunity Fund is another top performing fund in the category. Year to date as of December 1, 2017 the Fund had a return of 24.07%. The Fund uses a proprietary investment process for identifying undervalued and overvalued securities. It also has a transparent framework for its portfolio holdings. The Fund invests in U.S. equities across all market capitalizations and may also invest in foreign equities. It seeks to buy undervalued companies and take short positions on overvalued companies. It generally holds 40 to 60 long positions and 40 to 75 short positions.

  1. Hedge Fund

    A hedge fund is an aggressively managed portfolio of investments ...
  2. Multiple Managers

    Multiple managers refers to the multiple involvement of different ...
  3. Closed Fund

    A closed fund is a fund that is closed - either temporarily or ...
  4. 130/30 Mutual Fund

    A mutual fund that has long positions and short positions in ...
  5. Active Investing

    Active investing refers to an investment strategy that involves ...
  6. Index Fund

    An index fund is a portfolio of stocks or bonds that is designed ...
Related Articles
  1. Investing

    Evaluating Hedge Fund Performance

    Most are aware of hedge funds, but many don't know the dirty details of this investment type.
  2. Investing

    Investment Strategy Case Study: Traditional Vs. Alternatives for 2016

    Learn more about some types of alternative investments and why you should consider adding them in your portfolio in 2016.
  3. Investing

    Hedge Funds: Higher Returns Or Just High Fees?

    Discover the advantages and pitfalls of hedge funds and the questions to ask when choosing one.
  4. Financial Advisor

    Should You Buy Vanguard’s New Liquid Alts?

    An alternative strategies fund by Vanguard? We examine this new actively managed offering by the world's largest mutual fund provider.
  5. Investing

    Hedge Funds Having a Great 2017, So Far

    With low correlations and high leverage, equity funds are off to a solid start in the new year.
  6. Financial Advisor

    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.
  7. Personal Finance

    Top 5 Books to Learn About the Hedge Fund Industry

    Individual investors and investment professionals alike can obtain valuable knowledge from reading these five books on the hedge fund industry.
  8. 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.
  1. Can mutual funds invest in hedge funds?

    Learn about mutual fund portfolio management techniques and mutual funds' ability to invest in hedge funds, as well as new ... Read Answer >>
  2. Which are the most popular mutual funds that target the financial services sector?

    Discover some of the most popular and highest rated mutual funds offered that hold stock portfolios in the financial services ... Read Answer >>
Hot Definitions
  1. Entrepreneur

    An Entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture. ...
  2. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  3. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  4. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  5. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  6. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
Trading Center