Long-Short Funds Not All Created Equal
Although the category performed within expectations during the recent market skid, there was a lot of variation among individual funds.
Josh Charlson: After the stock market volatility in August, it's worth taking a look at how the long-short equity category performed. These funds take a hedged approach to equity investing by usually shorting individual stocks or using baskets of futures or indexes or even options to hedge out their long equity exposure.
So, how did these funds perform in August? You would expect, based on their beta or equity sensitivity, that they should have reduced downside compared with the S&P 500. In fact, they performed within expectations. When we look at the stretch from Aug. 17 through Aug. 24, in which the S&P 500 was down 9.4%, funds in this category, on average, were down about 4.8%. That's within expectations. However, you have to be aware that there is a lot of variation in the category--both in terms of the approaches that fund managers take as well as the beta or exposure of the managers to the stock market.
Josh Charlson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.