How does a fund that runs a market neutral L/S equity strategy work?
Say I analyze a stock in the telecom sector and I come to the conclusion that it is 30% undervalued. What happens next? Do I buy this specific stock and simultaneously go short the whole telecom sector? Do I go short the whole market?
What am I earning in the end? Only the performance of the stock ABOVE its peers? So I'm not benefiting at all of, let's say, the superformance of the telecom sector above the market?