If you are looking for an Investment Fund to diversify your investments, you must have come across this expression: Long Biased.
Next, we explain what it is and if the strategy of this type of Fund can be useful for your investor profile.
Long Biased Funds tend to be long on equities. However, it has flexibility in its mandate to reduce net exposure in bad market times.
The English word “long” is used to indicate the purchase of assets for a longer period in order to gain from their appreciation. The “biased” means “biased” in English. In a free translation, “Long Biased” Funds have a tendency to stay long in stocks, but they don’t always do just that. They can, at certain times, operate short and gain from the fall of a stock (short operation in the market).
Long Biased funds can be classified both as an equity fund and as a multimarket fund (type of fund that gives the manager more freedom to draw up strategies involving assets of different natures, such as stocks, foreign exchange, etc.). It is the manager who chooses this when registering the fund.
It is important for investors to pay attention to the strategy that the Fund uses. When it comes to Long Biased, there could be several. It is important to read the Fund’s regulations carefully.
Long Biased adjust net exposure by buying and selling stocks in the long portfolio.
They also take short positions in specific stocks or in the index itself to reduce the fund’s net exposure.
These types of Funds also set up short positions of companies that are expensive or have problems in their fundamentals. In this case the manager expects to profit from the decline.
They can also operate assets such as currencies and commodities, which act as protection for certain positions in the long portfolio. In this sense, an example is the Fund selling the dollar if it wants to protect a position in an exporting company.
Who is it for?
According to experts, this type of investment is for those with a bold profile. Nothing prevents those with a conservative profile from having a small exposure of their assets to these Funds.
It is worth remembering that Long Biased funds tend to defend themselves very well in months of stock market declines.
For people who don’t want or don’t know how to invest in stocks, it can be an alternative to invest in them a small percentage of the financial capital, if the investor wants more risk in the portfolio.
Difference for the Long Short
Long and Short Funds carry out operations buying and selling two assets in the same transaction, simultaneously.
Long Biased Funds, on the other hand, tend to be long in stocks, but sometimes they can operate short.
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