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Long/short funds use conventional methods to identify stocks that are either undervalued or overvalued. These funds seek to gain from both winning and losing stocks, irrespective of the current market scenario. They profit from shorting overvalued stocks and by buying undervalued stocks. The main objective of these funds is to seek returns at minimal risk.
For example, an investor takes $2 million short position in M&T Bank and $2 million long position in JPMorgan Chase. So, any decline in financial stocks will result in a profit on the M&T Bank position, and a loss on the JPMorgan position and vice versa. This will balance both positions and ensure lower downside risk.
Wasatch Long/Short Investor seeks growth of capital. FMLSX invests the majority of its assets in long and short positions with respect to equity securities like common stocks of companies with market-cap of $100 million and above. The fund invests in those common stocks that are expected to be undervalued and sell short those equity securities that are believed to be overvalued. Wasatch Long/Short Investor has a year-to-date return of 17.3%.
FMLSX has an expense ratio of 1.30% as compared to the category average of 1.95%.
Schwab Hedged Equity invests the lion’s share of its assets in long and short positions with respect to equity securities of U.S. companies. SWHEX seeks appreciation of capital for the long run. The fund focuses on common stocks of companies with market-cap of more than $1 billion. Schwab Hedged Equity has a year-to-date return of 10.9%.
Jonas Svallin is one of the fund managers of SWHEX since 2012.
Astor Long/Short I (ASTIX - Free Report) seeks appreciation of capital as well as income. ASTIX invests mainly in exchange-traded funds (ETFs) that normally invest in U.S. and non-U.S. common stocks, fixed-income securities, cash equivalents and specialty or alternative securities. The fund focuses on investing the bulk of its assets in ETFs. Astor Long/Short I has a year-to-date return of 5.9%.
As of September 2016, ASTIX held 15 issues, with 14.97% of its assets invested in iShares Core S&P 500.
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3 Strong Buy Long/Short Funds to Consider
Long/short funds use conventional methods to identify stocks that are either undervalued or overvalued. These funds seek to gain from both winning and losing stocks, irrespective of the current market scenario. They profit from shorting overvalued stocks and by buying undervalued stocks. The main objective of these funds is to seek returns at minimal risk.
For example, an investor takes $2 million short position in M&T Bank and $2 million long position in JPMorgan Chase. So, any decline in financial stocks will result in a profit on the M&T Bank position, and a loss on the JPMorgan position and vice versa. This will balance both positions and ensure lower downside risk.
Below we share with you three top-rated, long/short mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of long/short mutual funds, their Zacks Rank and past performance.
Wasatch Long/Short Investor seeks growth of capital. FMLSX invests the majority of its assets in long and short positions with respect to equity securities like common stocks of companies with market-cap of $100 million and above. The fund invests in those common stocks that are expected to be undervalued and sell short those equity securities that are believed to be overvalued. Wasatch Long/Short Investor has a year-to-date return of 17.3%.
FMLSX has an expense ratio of 1.30% as compared to the category average of 1.95%.
Schwab Hedged Equity invests the lion’s share of its assets in long and short positions with respect to equity securities of U.S. companies. SWHEX seeks appreciation of capital for the long run. The fund focuses on common stocks of companies with market-cap of more than $1 billion. Schwab Hedged Equity has a year-to-date return of 10.9%.
Jonas Svallin is one of the fund managers of SWHEX since 2012.
Astor Long/Short I (ASTIX - Free Report) seeks appreciation of capital as well as income. ASTIX invests mainly in exchange-traded funds (ETFs) that normally invest in U.S. and non-U.S. common stocks, fixed-income securities, cash equivalents and specialty or alternative securities. The fund focuses on investing the bulk of its assets in ETFs. Astor Long/Short I has a year-to-date return of 5.9%.
As of September 2016, ASTIX held 15 issues, with 14.97% of its assets invested in iShares Core S&P 500.
To view the Zacks Rank and past performance of all Long/Short mutual funds, investors can click here to see the complete list of long/short mutual funds.
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