Long/Short Fund: Meaning, Overview, Examples
What Is a Long/Short Fund?
A long/short fund is a type of mutual, hedge, or exchange-traded fund (ETF) that takes both long and short positions in investments. Essentially, they take long positions in stocks they expect to increase in value and short positions in stocks they think are headed lower. These funds often use investing techniques—leverage, derivatives, short positions, and more—first used by hedge funds and then taken up by mutual funds and ETFs later. As the name suggests, most hedge funds are of this type, while the Financial Industry Regulatory Authority (FINRA) lists 176 mutual funds and ETFs in this category. Long/short funds are also called enhanced or 130/30 funds.
Key Takeaways
- Long/short funds use an…
