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Market-Neutral Funds: Watch These Fast-Growing Quantitative Equity Strategies

And a short primer on the strategy.

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Months of near-consistent outflows have taken a toll on the market-neutral Morningstar Category: Total assets for these funds have dropped from a peak of $34 billion in August 2014 to $21 billion at the end of May 2017.

However, two of the top five largest funds in the market-neutral category— Vanguard Market Neutral (VMNIX) and (AQR Equity Market Neutral I) (QMNIX)—have grown their total assets substantially during this period. Below, we provide an overview of equity market-neutral investing and the associated capacity concerns with the strategy and these funds.

Tayfun Icten does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.