Existence Of The Long Short Mutual Fund

By Author: Jamie Hanson
Total Articles: 3495
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The reason the long short mutual fund wasn't thought up many decades ago, or maybe it was but it couldn't be put into practice, is simply because of laws regulating how much a mutual fund could earn from short positions. However, in 1997 an amendment to the securities laws allowed funds that capitalized on short positions, like the long short mutual fund, to come into existence. As a result, the long short mutual fund is legal today although they are still regulated by securities laws to some degree. These regulations encompass things like how many short positions may be held as well as the use of derivatives among others.

Choosing a long short mutual fund to invest in is tricky. That's because there are many different stocks out there and choosing the right ones can mean success while choosing the wrong ones can end up in disaster. Before choosing to go the long short mutual fund route make sure you talk with your investment manager and find out how proficient he/she is at managing long short mutual funds. If for some reason you don't feel comfortable you will want to see out an experienced, or as experienced as possible, ...
... long short mutual fund manager to ensure your investment is as successful as possible.

Since the long short mutual fund has only been in existence for a little more than a decade there is no significant historical data to point to whether or not these are solid investments that will be successful for investors over the long term. Of course, there are some long short mutual fund investments that are doing very well and then there are some that have not performed at the level they were anticipating. This doesn't necessarily mean anything because the long short mutual fund is not a short term, get rich quick investment. Rather, it's an investment that is designed to work the market no matter whether it is up or down to result in a successful long short mutual fund in the end.

Long Short Mutual Funds as part of a balanced investment portfolio can help reduce risk and increase alpha.