Definition of 130/30

A 130/30 investment strategy is one that invests both long and short at the same time in an attempt to outperform a given index. It is called a 130/30 fund because the manager shorts up to 30 per cent of the assets in the fund (he borrows shares that he thinks are most likely to fall in price and sells them in the open market and buying them back at a later date after their price has fallen, locking in profits). The earnings from the short selling can be reinvested, allowing the fund manager to have 130% of the portfolio in long positions. The 130/30 ratio is a widely-used term for this type of strategy, but other ratios are possible. 

130/30 funds in the news

In May 2013 an FT writer investigated the decline in interest in 130/30 funds, mainly because they had underperformed compared to expectations. Some blamed the poor performance on some managers' inability to master the skills required for shorting.

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