What is a long short capital?
Long short capital is an investment strategy used primarily by Hedge fund managers who are managers of money who decide on trading in portfolio. It is a common strategy between this group and is driven by betting on the direction of shares. A long part of the equation is a bet that investment in stocks will increase value. The short end represents the bet that the value of the shares will drop. In the effective performance of a long short capital strategy, it minimizes the exposure to the risk of a trader on the financial markets. In 1949, Alfred Winslow Jones decided that there must be a way to make money, even if the financial markets are falling. This was short -circuited. When a trader passes through short shares, protects or ensures market risk by getting long shares in a separate trade. It is among the simplest and widely registered from dozens of Hedge Fund strategies.
Profits in a long short capital strategy are generated by a difference or spread between sales positions. Ideally there will be a shopThe Hedge Fund takes a long position in stocks that are undervalued on the basis of the expectation that securities will increase the price. On the other side of the trade, there will be short shares that he considers overvalued and which is likely to drop. If the fund manager plays the markets correctly, it will reap profits from shops.
While the foundations of long short capital strategies are constant, it has different applications. For example, the Hedge fund manager, who trades long short capital, can have a long or short bias, which means that it trades a larger percentage of portfolio in both directions. Also, a long short manager of its own capital may be different regions in which it trades and the sectors in which it invests.
From so many Hedge Funds Managers use long short capital as part of a business strategy, there is a risk that in this industry it will adhere to the mentality of the herd, which increases market risk. If most fund managers are long shares in a particular sector,such as energy and short shares in another industry, they say financial shares, managers place similar shops and bet a large percentage of assets of the Hedge Fund's total industry. Stock markets can be unpredictable even for the most demanding traders. If one or both of these stores implement or do not play as intended, a large part of industrial assets may be lost.