4 Blogs to Get You Up to Speed on
Long/Short Equity Strategies

After three months into 2019, the extreme volatility that occurred in 2018 might be easy to forget. However, it shouldn’t be so easily forgotten. Rather, it should underscore the importance of incorporating risk-mitigating strategies into your portfolio. As such, we have compiled some of our top long/short equity blogs to revisit the benefits of the strategy, and its critical place in a portfolio.

    1. 1. Four Things to Consider When Choosing a Long/Short Equity Fund
    2. “While long/short equity is appropriate for any type of investor willing and able to take at least some equity risk, it is especially ideal for those who want equity exposure with less volatility and more downside protection. As such, investors who are closing in on the need to draw down their investments, e.g., those nearing college or retirement, should be inclined to adopt the more tightly risk-managed approach to investing in equities that long/short equity strategies offer.”
    1. 2. The (Really) Long and Short of It
    2. “The risk most important to individuals isn’t standard deviation or volatility, it is the risk of losing the money they’ve worked their entire lives for. It is okay if your long/short equity fund underperforms in years the market is crushing it (like 2013 or 2017). The purpose of a long/short equity fund—at least in our opinion—is to outperform in difficult/volatile markets and to ultimately preserve investor capital. Don’t get lulled into funds with great short-term performance only to end up with an over-levered strategy that does not cushion on the downside as much as you thought when markets turn south.”
    1. 3. Finding “The Masters” of Long/Short Equity
    2. “We believe the need for Long/Short Equity strategies may be greater today than it’s been in decades due to rich valuations, the age of the bull market, and the return of volatility. And just like at the Masters, those who take the time to fully understand the nuances of each investment can end up wearing the proverbial green jacket at the end of the day.”
    1. 4. Long/Short Equity in a Raging Bull Market
    2. “In order to properly analyze any investment strategy, it’s imperative to identify the risk factors embedded in the portfolio. All returns come from bearing risk in some form, so what risks are prevalent within long/short equity portfolios? At the most basic level of course, investors in long/short equity strategies take on equity risk, and therefore garner the lion’s share of their return from the equity risk premium. As an aside, because most long/short funds are systematically long biased (and few ever get remotely close to being net short), we believe long/short equity should be allocated to as part of the equity allocation, and not the amorphous “alternatives” bucket. Ultimately, long/short equity delivers equity beta, even if in a lessened form than long-only funds.”

Learn more about 361 Capital’s Long/Short Equity Strategies >