Nearly two years ago, we wrote about the increasing beta we saw in many Long/Short Equity funds and the potential downside it could cause if markets were to stop their upward trajectory. At the time of that writing, we were smack in the middle of a record bull market run and it likely wasn’t a concern to many readers. A few months later, in late 2018 we did see some volatility, but by the time anyone noticed, markets shot higher (in early 2019) and strategies with higher beta continued to outperform those that were less sensitive to overall market movements.

We’ve written extensively this year about building portfolios that can withstand multiple market conditions and how the next ten years may look very different than the last. While building the overall asset allocation is going to have the largest impact on your client’s ability to reach their investment goals over time, individual investment selection, particularly within alternatives, is a vital component of the overall success. The reason this is so critical in alternative categories is that dispersion is often much wider than in traditional asset classes.

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.

The current market environment could give active managers a chance to shine, but absolute returns could throw shade on strong relative performance.

We’ve written in the past about the long/short equity category and how the recent performance of several of these strategies has a lot to do with the fact they have high beta relative to the category, and lots of leverage. Today, we wanted to write about something else that has been slowly affecting the way performance of the category has looked relatively, and becomes even more impactful when Q3 2018 comes to an end.