130/30 Funds

llamagatekeeper · #1 (**permalink**) 08-07-07, 11:48 AM

Anyone else been reading about these funds? I can't quite get my head around the numbers, but will give it my best trying to explain a little bit about it. 130/30 is basically what it sounds like. You take $1,000,000 and then short 30% of your portfolio while reinvesting the new cash into long positions. In essence you are trying to gain maximum alpha... Anyone else care to explain it a little bit better with more explanations on why they are doing things these ways?

aquaswim47 · #2 (**permalink**) 08-07-07, 05:42 PM

The first thing it sounds like is it may be another way to drive up commissions and make the fund more expensive. But if the person believes he can pick 30% of the allocation to be in stocks that will go down (or go up less than the other portfolio components) than it might have some merit as an active management portfolio. It might also have some merit if the portfolio invests in futures and leverage whereby the portfolio is not 130% long 30% short but instead 130% of the market, than that might also be logical. More risk/more potential reward.