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By Staff Reporters
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Dedicated short bias strategies short stocks expected to depreciate as a result of company-specific catalysts or falling markets. These strategies maintain a net short exposure to the equity market, seeking to reduce equity portfolio volatility and offer the potential to earn returns in falling equity markets. Of course, they may be challenged in periods of rising equity markets.
From Shorting to a Short Bias
Prior to the long-term bull market for U.S. equities that took place in the 1980s and 1990s, many hedge funds used a dedicated short strategy, rather than a dedicated short bias strategy.
The dedicated short strategy was one that exclusively took short positions. The dedicated short funds were virtually destroyed during the bull market, so the dedicated short bias fund emerged and took a more balanced approach. The long holdings are enough to keep losses manageable, although funds can still run into problems with leverage and capital flight if losses continue for too long.
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Filed under: "Ask-an-Advisor", Accounting, Experts Invited, Financial Planning, Glossary Terms, Investing | Tagged: books, dedicated bias, Investing, leverage, markets, short sales, shorting | Leave a comment »
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