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White Paper

Is Your Equity Hedge Fund Portfolio Resilient Enough for Uncertain Times?

We analyze the historical macroeconomic sensitivity of traditional asset classes and major hedge fund strategies. We show that the average hedge fund is unlikely to provide meaningful diversification during periods of macro uncertainty, which are also typically difficult for traditional assets. However, long/short low-risk strategies have tended to exhibit low macro sensitivity.

Key Design Choices in Long/Short Equity

Investors are looking for resilient sources of return in the face of mounting headwinds for equity markets. Long/short and market-neutral equity strategies deserve consideration. We review the case for allocating to long/short equity and address several key choices faced by investors and by managers.

Perspective

Shorting Counts

Man Group recently wrote an op-ed titled “Short-selling does not count as a carbon offset.” Of course we agree it doesn’t. But the headline is quite misleading if taken to mean shorting has no role in the fight to reduce carbon emissions. Shorting does exactly what it’s supposed to do – raise the cost of capital to the emitters, even more so than divestment.

Perspective

Shorting Your Way to a Greener Tomorrow

It would be an understatement to say there is confusion in the industry about the use of shorting in an ESG context. When it comes to calculating a portfolio’s ESG score, we have heard arguments ranging from "ignore the shorts” to “net them against longs,” and, my favorite as it’s creatively insane, “pretend the shorts are actually longs.” This note explains why it is critical that shorts be properly accounted for, so that investors can use shorting to reduce carbon exposure, to get to net zero or to achieve other ESG goals.

White Paper

Understanding the Tax Efficiency of Relaxed-Constraint Equity Strategies

A guide to tax-aware relaxed constraint strategies that also tries to enlighten investors on the nuances around tax benefits by comparing different tax-aware strategies with an equity beta of one.

Journal Article

The Tax Benefits of Relaxing the Long-Only Constraint: Do They Come from Character or Deferral?

Are there tax benefits from relaxation of the long-only constraint? If so, what are the sources? To answer these questions, we decompose the total tax benefit (or liability) of a strategy into two components.

White Paper

Building a Better Long/Short Equity Portfolio

Conventional approaches to long/short equity (LSE) can introduce unintended risks. We propose an alternative approach that may more efficiently harvest the returns underlying LSE investing, while providing greater transparency and better risk control.