Long / short equity
Long / short equity is becoming increasingly popular as a hedge fund strategy.
Long / short equity is becoming increasingly popular as a hedge fund strategy. To go long in an equity, the manager buys, anticipating a price rise. To go short, he identifies a sector and a stock he reckons is due a fall (for example, UK retail). He borrows shares from a major holder like a pension fund, and then sells them in the market. The money he gets for them is put on deposit and earns interest for the fund.
If all goes well, the stock falls and he buys it back at a lower price (if the stock ends up rising, he can lose a lot of money trying to buy it back). The original stock is then returned to the lender plus a borrowing fee.
See Tim Bennett's video tutorial: Why a short-selling ban won't work.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.
-
Review: Eden Roc Cap Cana – fun, sun and golf in the Caribbean
Travel Eden Roc Cap Cana in the Dominican Republic offers everything from relaxing by the pool to a world-class golf course
-
Reeves delays cash ISA reform, but savers are not out of the woods yet
The chancellor has reportedly delayed plans to cut the cash ISA limit, which were set to be announced at Mansion House on 15 July, and will take more time to consult with the industry