The following is a guest post from Eric Fernandez, CFA of Two Rivers Analytics.
The S&P is at record highs yet again. Shorting has been difficult for the past several years as equities have continued their ascent. More than a handful of well-regarded short-biased funds have closed their doors since 2014. You could be forgiven for asking what shorting is good for.
Don’t short-change shorting
The top three reasons institutions invest in hedge funds, according to Prequin’s Global Hedge Fund Report, are:
- to seek uncorrelated returns (59%);
- to seek higher risk-adjusted returns (56%); and
- to reduce portfolio volatility (46%).
Surprisingly, just seven percent (7%) of...