130/30 Funds: What is Behind the Commercial Offensive?

10 Pages Posted: 25 Nov 2007  

Walter Géhin

EDHEC Business School - EDHEC Risk and Asset Management Research Centre

Date Written: October 2007

Abstract

High-conviction funds, beta-one funds, short extension funds, limited-shorting funds, long-enhanced funds, active extension funds, hedge-fund lite: there is a wide range of terms for what is most frequently called 130/30. Broadly, this strategy initially invests 100% in an index, sells short 30%, and uses the proceeds from the shorts to buy an additional 30% likely to beat the benchmark.

In this paper, we examine some crucial points related to these funds: their theoretical foundation, the optimal level of shorting, the distinction between the quantitative and fundamental approaches, whether these funds are natural extensions of long-only funds, and finally the risk of neglecting their risk.

Keywords: performance, 130/30, long/short, alpha, shorting

Suggested Citation

Géhin, Walter, 130/30 Funds: What is Behind the Commercial Offensive? (October 2007). Available at SSRN: https://ssrn.com/abstract=1032110 or http://dx.doi.org/10.2139/ssrn.1032110

Walter Géhin (Contact Author)

EDHEC Business School - EDHEC Risk and Asset Management Research Centre ( email )

58 rue du Port
Lille, 59046
France

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