concentrated L/S market neutral strategies
Hello,
From what I've read it seems like the big knock on L/S single manager funds is that they're just capturing beta/market cycles (e.g. tech growth funds that did really well this year are just benefiting from a risk-on environment) and the argument for MM funds is that the market neutral model removes those distortions in favor of actual alpha from getting earnings/catalysts right. I'm wondering whether there are concentrated single manager funds that put on a few high conviction long and short positions but target very low net exposure as well - seems like that kind of model would exhibit both the alleged benefits of a single manager model (deep research/fundamental understanding, long-term horizon) as well as the market neutral nature of a multi manager fund. Is that a thing, or am I completely misunderstanding?
Neutral means more than just exposure neutral. There are a million factors to hedge out which gets difficult with concentrated portfolios. you are pretty much always heavily exposed a few factors under that framework.
Most of the concentrated funds that people criticize as being long beta do in fact run concentrated L/S dollar exposure-neutral portfolios.
got it, thx
Not sure about "millions of factors", there are hundreds of published equity factors that work well in history. Maybe a dozen or two are actually reliable.
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