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There are several reasons to employ a long-short hedging strategy for hedge funds and individual accounts. We believe the key reason is the inherent reduction in volatility. This reduction is a result of the inclusion of both long and short positions within an account, specifically at volatile times.
The image depicted displays a reduction in volatility versus that of the broader market indices, each index making up a large number of hedge funds. We believe that we can achieve an equal or greater level of reduction than that of the hedge fund indices depicted in the graph.
An additional reason to employ the long-short trading strategy is performance versus size. Extremely large funds encounter performance issues because of the amount, as well as the size of transactions necessary to manage the accounts.
Because LANDOR & FUEST manages individual accounts, we can control the size and type of trades placed on an account by account basis. Therefore, we can ensure we are not losing performance due to large positions effecting market pricing.