if you have reason to believe securities will increase in value then why wouldn’t the inverse be true if you’re doing effective fundamental analysis? so why doesn’t everyone do L/S
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Perhaps I'll kick off with a couple reasons, and leave the HF experts to add.
1) HFs generally have clients, and those clients (e.g. pension funds), and those clients may have certain mandates which preclude having a L/S hedge fund in their holdings mix (rightly or wrongly, but it is what it is). Demand and supply, and the ability to effectively fundraise, are real factors.
2) L/S and Long-only are different skill sets, and require a slightly different ability to manage risk - it isn't all about the fundamental analysis
Regulatory. L/S and most if not all HFs require investors to be "qualified investors" (institutional or minimum net worth, etc). Which leaves most individual investors not elegible for L/S.
Much easier to run a long-only fund. Indexes funds for instance are inherently long-only. And most stocks go up over time (due both to growing economy and also inflation) so it's far easier to make money on a long bet than on a short bet.
Also, normal non-finance people think long-only is more familiar, safer and more ethical ("Shorting is betting against a company and that's evil to be rooting for them to fail!!!")
Early retirement.
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