What is long/short anyway?

Long/short – what could go wrong? Hedged positions, protection etc etc etc.

And yet there are headlines like this one:

Here’s Why Long / Short Hedge Funds Are Getting Hammered

One of the problematic aspects of such a headline is that “long/short” is a hard category to define – and there is no consensus around the term. Which leaves plenty of room for whatever angle one wishes to shock and amaze with.

The IAM took a stab at the definition in cooperation with the LSE’s Financial Markets Group a few years ago. They produced the following classification table of hedge fund strategies:

A cursory examination will show that Long/Short is a broad church – and one with some disciples who regularly trek over to the neighbouring tabernacle of Relative Value to worship.

Thus probably it is worth defining precisely what sub-class of strategy is being analyzed before daubing all with the same brush.