Long-Short Hedge Strategy

Long-Short Hedge Strategy

by Richard C. Wilson & Family Offices Group Association Team

Family Office Definition: Long-Short Hedge Strategy

Long-Short Hedge Strategy definition:  Long-short strategy is a hedging practice where the investment manager chooses stocks that are believed to perform poorly and uses leverage to sell those stocks short. The cash proceeds from selling the stocks short is used to purchase stocks that are believed to outperform the market.  When implemented successfully, the investor benefits from stocks (sold short) that are falling in price and stocks (bought long) that are appreciating.  A common example of a long-short portfolio is a 130-30 strategy, which involves buying stocks long for 130% of the portfolio and selling stocks short for 30% of the portfolio.

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