When Shorting Falls Short of Expectations

Recent quarterly returns suggest that shorts can be both a boon and a bane to a hedge fund’s net performance.

Does a fund’s short portfolio drag down the same fund’s long performance?

There are no clear trends, but a random analysis of quarterly and year-end letters by hedge fund managers seems to provide evidence of a direct correlation. Some results indicate that the shorts in portfolios have cost many hedge fund managers a significant amount of upside.

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