While the merits of short selling – and its impact on markets – will always be hotly debated, the fact remains that short selling plays an important role in ensuring that securities are priced correctly relative to fundamentals. It also provides an additional opportunity for portfolio outperformance.
Traditional long-only fund managers are, by definition, skewed towards identifying opportunities to buy, whereas those managers that adopt a long-short approach can take a position in a range of investment opportunities across a much wider spectrum of investment options through both buying and short-selling.
The most obvious benefit of long-short investing is that it offers investors the ability to benefit from both rising and falling prices.
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