long/short fund

Long/Short Fund

A type of mutual fund that mimics some of the trading strategies typically employed by a hedge fund. Unlike most mutual funds, long/short funds use leverage, derivatives and short positions in an attempt to maximize total returns, regardless of market conditions. Long/short funds are limited by law in the number of derivatives, short positions and the amount of leverage that the fund may contain. They invest primarily in stocks.

Investopedia Commentary

Long/Short funds are the mutual fund industry's attempt to bring some of the beneficial features 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. Furthermore, unlike most mutual funds, long/short funds usually require a minimum investment of more than $1,000, although some do not. Long/short funds aren't allowed to use as many derivative and short positions or has much leverage as hedge funds, but they do provide some diversification to the average investor in down markets.

Related Links

Introduction To Hedge Funds - Part One
Introduction To Hedge Funds - Part Two
Taking A Look Behind Hedge Funds
A Brief History Of The Hedge Fund

See also: Derivative, Hedge Fund, Leverage, Mutual Fund, Short (or Short Position)

Also spelled: long short fund, long-short fund, longshort fund, long short funds, long-short funds, long short funds