Do Long-Short and Market Neutral Mutual Funds Sail on Even Keel?
The Journal of Investing Winter 2017, 26 (4) 69-80; DOI:10.3905/joi.2017.26.4.069
27 Pages Posted: 19 Jun 2020
Date Written: September 7, 2016
Long-short and market neutral funds seek superior risk-adjusted returns while limiting their exposure to stock market risk. Over the 1999 to 2013 period the number of funds with these investment objectives increased by over 700 percent. Despite their growing popularity, we find that long-short and market neutral deliver lower risk-adjusted returns than U.S. Treasuries. Our investigation also reveals that the returns of both types of funds are positively and significantly correlated with the stock market. However, both fund types perform better in down markets. Finally, we report that market-neutral funds outperform long-short funds.
Keywords: Active Alts, Long-Short, Market Neutral
JEL Classification: G1,G2
Suggested Citation: Suggested Citation