Thursday, March 01, 2007

Long/short mutual funds revisited

I wrote about long/short mutual funds a while back. These are funds that can take both sides of the market. Since Tuesday has all the signs of an important market top, it’s appropriate to revisit them and see how they fared at this turning point. In the original article, I looked at OADEX, QUAGX, DIAMX, IOLIX and HSGFX. One reader suggested TFSMX which is also included here. The table below shows the daily changes of these funds along with the S&P for Tuesday and Wednesday.

Alright, there is no prize for picking the odd man out. To be fair, most of the long/short mutual funds cap the short positions at 20%, whereas I believe HSGFX can be fully hedged through futures or options.

I’ve mentioned bear market funds and inverse ETFs as a tool for portfolio hedging. For those less aggressive, HSGFX is certainly something to look at, especially given its low volatility and stellar performance during the last bear market.

Disclosure: I’m in the process of taking/increasing a position in HSGFX.

Update: This post first appeared on I later found this Mebane Faber article with a list of other interesting funds.