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Long-Short Credit Fund

What Is a Long-Short Credit Fund?

Long-Short Credit Funds seek to profit from changing credit conditions, either from individual bond issuers or credit market segments via credit indexes. Because the fund’s holdings can be long or short, a manager can bet on credit improving or worsening. A fund’s manager typically buys bonds or sells credit default swaps when she expects to profit from narrowing credit spreads. Contrarily, she might sell bonds or buy credit default swaps when she expects to profit from deteriorating credit. Fund managers often hedge against interest-rate risk with derivatives, and some hedge against credit market risk as well.

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