Investors warned to look beyond 130/30 'hype'

Popular in the United States, a 130/30 fund is structured with 100% of the value in a long only portfolio and 30% invested in a portfolio which shorts stocks. Morningstar senior fund analyst Todd Trubey says a 130/30 fund is “extremely dependent” on a manager’s stock-picking skill. “Stock-picking is even more important (than long term funds), as managers must correctly pick shares that will go down and shares that will go up,” he says. “This creates the possibility that if the manager fares poorly on both fronts, the fund could suffer much more than he would at a long-only offering.” In...