What is 130/30 investing?

  • 130/30 investing aims to deliver higher returns to investors by capitalising on both overpriced and underpriced stock opportunities. The final 130/30 portfolio is an aggregation of, on average, 130% of the best long ideas (undervalued securities) and, on average, 30% of the best short ideas (overvalued securities) derived from our ‘intrinsic value' process taking into consideration input from our risk model, pair trade opportunities, and other relevant economic and statistical data

  • The long portfolio acts like a typical equity fund where the manager aims to purchase stocks that will outperform the market and deliver capital growth potential

  • For the short portfolio, the manager selects stocks which they believe are mispriced relative to their intrinsic value. Conceptually, a stock that is “shorted” generates a return when the stock decreases in value. In its simplest form, shorting a stock consists of a manager borrowing a stock that is believed to be overpriced and selling that stock in the open market to generate cash proceeds. In a 130/30 strategy the manager uses those cash proceeds to buy more stocks long. In the future, the manager must repurchase the stock in the open market and return the stock to the lender. If the manager's insight is correct, he/she will repurchase the stock at a lower level than it was originally sold. The net cash proceeds minus fees comprise the manager's return

  • Whilst conceptually this is how the shorting process for a 130/30 strategy works, we will use derivatives and swaps to implement the above scenario

  • By delivering additional alpha from both the long and short components of the portfolio, the Fund aims to provide investors with higher outperformance over the medium to longer term than a standard long-only fund.