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Long/short equity funds - Investment in 2019

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There are many who want a fund unrelated to markets, having low volatility and offering desired diversification. Getting a reliable long / short equity fund is difficult. Previously, these funds were able to provide 6 to 8 per cent returns per annum but selection of funds is a difficult task. Leading top performance funds have a direct correlation to the markets and are susceptible to market corrections. The returns depends upon the strategy adopted by the investment managers, which can be atypical – traditional, or based on certain quantitative mathematical calculations involving returns and rates for each individual stock.

Although, the fund managers adopt market neutral strategies, it can result in negative growth, as in 2019, when most long – short equities – market neutral funds and some large hedge funds could not provide the desired returns due to high volatility, growing interest rates and changing global monetary policies.

In 2015 – Ben wallance was picked as one of the best fund – that was a traditional long/short fund and those looking for short fund picked up Jupiter Absolute return. There can be hundreds of funds offering variable returns and many such funds provided mechanisms to capitalize on unpredictability of the markets. In 2016, L&G UK Alpha Trust delivered 6.4 per cent returns and Schroder Recovery 5.17 per cent. In 2010, these funds were a hit offering mostly ups and no loss but in 2019, US investment grade credit had one of the worst results and some risky options have been able to provide better returns. The currencies are fluctuating heavily and some currencies suffered extreme losses. The first six months of 2018 was tough for multi asset investment. The impact of trade war had long term impact on multi asset investment, where investors were advised to increase the hold duration to reduce risks.

The MSCI World High Dividend Index was down by several points during this time and many dividend paying stocks struggled to maintain rates. Jupiter introduced new funds in the first six months and the fund plans to introduce some more new options in September 2019. These will be multi asset income fund with a long-short equity option. Similarly, the European equity fund will be launched in coming months. These funds will include various options to encompass global funds which will have barriers and set of equities, bonds and other funds. Most fund managers believe in multi asset investment where the exposure will be diversified to enhance performance. Diversification will handle stress and uncertainty, or these will contain some fixed income bonds. These funds can get returns up to 8 per cent, particularly, in conditions, where 35 per cent of the portfolio has equities with higher returns.

Due to the fears of recession, the fund managers are reducing risks and investing in long term secure assets. Investors are seeking fixed income options for higher insulation against risks and rising interest rates. Investors are trying to stay with pro risk options in equities and diversifying. A balanced inclusion of risky and non-risky equities and assets can provide the best returns.

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