“Useful-to-know Financial Terms #7: Long/short Funds”

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“Long/short funds are the mutual fund industry’s attempt to bring some of the advantages of a hedge fund to the common investor. Most long/short funds feature higher liquidity than hedge funds, no lock-in period and lower fees. However, they still have higher fees and less liquidity than most mutual funds. Long/short funds aren’t allowed to use as many derivative and short positions nor as much leverage as hedge funds, but they do provide some diversification to the average investor in down markets. Unlike most mutual funds, long/short funds use leverage, derivatives and short positions in an attempt to maximize total returns, regardless of market conditions.” – Investopedia

Long/short funds are gaining popularity in Korea nowadays as investors worry about the potential bearishness of the stock markets due to slowing economic growth and rapidly aging population. Long/short funds can invest up to 20% of their net assets but investors with large short positions are required to report to the financial authorities.

Read FT’s related article -> http://goo.gl/hn9HX7

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