Where have you heard about long/short equity?

For almost as long as hedge funds have been around, they've been using long/short equity as a strategy because it's a way to manage investment risk and minimise market exposure.

What you need to know about long/short equity.

On the surface, long/short equity seems like a common-sense way of making profit while minimising risk. A trader will predict which company or security is going to perform better, and invest in that company while shorting their shares in another company.

Some long/short equity strategies also employ a market-neutral strategy, where they place equivalent dollar amounts on each position to minimise investment risk.

However, there are still risks involved. A hedge fund manager has to be smart in his or her research to be sure that their prediction is going to come true, and there are always potential problems when trying to sell shares of a security.

Find out more about long/short equity.

Long/short equity is mainly associated with hedge funds. Read our guide to hedge funds to learn more.