Home>Video>4 Medalist Ideas for Long-Short Strategies

4 Medalist Ideas for Long-Short Strategies

Thu, 24 Apr 2014

The combination of manager skills and lower beta make these funds attractive options for investors seeking low-volatility equity exposure.


Video Transcript

The Morningstar Minute is our quick take on investments, the market, economic indicators, and more. Join us every day for fresh insights from our analyst team.

Josh Charney: There was once a time where investors needed to look to hedge funds to invest in long-short equity strategies. Today that is no longer the case. There is now $57 billion in long-short equity mutual funds, which is a 200% increase since 2011. There are approximately 110 funds for investors to choose from and Morningstar covers 17 of them and gives seven of them a positive, favorable rating.

The reason investors are clamoring for long-short equity funds is because they are generally a safer place to invest with a lower volatility than the market.

In 2008, for example, these funds fell 13% compared with approximately 37% for the S&P 500. That is because these funds have generally a lower beta than the S&P 500, of about half. In an up year like 2013, one would expect these funds to underperform, as well. For example, last year, the funds went up approximately 14% compared with 32% for the S&P 500. But besides beta, investors would be smart to look at alpha, or manager skill. Morningstar analyzes alpha on both the long side and the short side of the portfolio.

Other things we look at are a management team that has a proven track record in short-selling securities, which can be relatively dangerous as well as a firm that is not new to any of these strategies. Some of the funds we like in this area are Robeco Boston Partners Long/Short Equity, Robeco Boston Partners Research Fund, MainStay Marketfield, and Wasatch Long/Short.

  1. Related Videos
  2. Related Articles
  1. Become a Better Index Investor

    Roundtable Report: Experts dig into the ETF versus index fund debate, active and passive strategies, fixed-income benchmarks, factor investing, and much more.

  2. How to Make the Most of Your 401(k)

    In this special presentation, get the answers to key questions about the quality of your plan, whether your savings are on track with your goals, how to allocate assets, and what to do with assets when you leave your job.

  3. Ready Your Portfolio for Retirement

    Morningstar's Christine Benz demonstrates how to make a bucket portfolio best work for you, touching on allocation, RMDs, other income sources, and more.

  4. Fuss: Think Like a Psychologist

    Perception of a security and sector carries critical importance in the Loomis Sayles Bond manager's long-term process.

  5. Low Turnover Creates High Marks for Dodge & Cox Stock

    Long security-holding periods and high retention of in-house personnel have contributed to this Gold-rated fund's category-leading performance.

  6. Oakmark International's Secret Hiding in Plain Sight

    The fund's plain-vanilla focus on company fundamentals allows it to uncover value in any kind of stock and has contributed to its long-term outperformance, says Morningstar's Shannon Zimmerman.

  7. Fuss: Cautious of Geographic, Credit Risks

    The Loomis Sayles Bond manager expects rates to trend higher, but growing geopolitical tensions are reasons for concern in the credit markets.

  8. Picks and Strategies to Navigate Today's Market

    Roundtable report: Morningstar strategists offer up their best ideas for a fully valued, low-yield market with few attractive choices.

©2017 Morningstar Advisor. All right reserved.