1. Long-short is the largest hedge fund strategy and falls under the AIF category-III.
2. Through this strategy, a fund manager expects to participate and profit from the rise and fall in certain stocks.
3. A fund manager goes long or takes a buy position in such stocks which have the potential to appreciate and goes short or sells stocks without having delivery in stocks that are expensive with the aim to make a profit.
4. Fund managers can go wrong in the direction of trading strategy or in selection of stocks, leading to losses.
5. These strategies can form a part of the asset allocation of an investment portfolio based on the volatility and concentration risk in the funds.
(Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)