US - Wilshire Consulting has released a report monitoring the impact of short-extension strategies and the opportunities for investors using them.
The firm said the first thing for investors to understand is that the term “short-extension” has a broad definition.
Wilshire Consulting said: “Although the term 130 / 30 is being widely used to define this space, some managers may only extend 10%, instead of 30%, while others may go further.”
During the past two years, the firm said a plethora of institutional money managers have introduced short-extension strategies.
It said the vast majority of those have been managers whose investment philosophy and process is rooted in quantitative methods although fundamental managers have also thrown their hat in the ring.
In terms of its impact, analysts noted: “The early evidence exhibited by short-extension managers is encouraging. Most of the managers identified by Wilshire as having any meaningful track record have produced additional residual return by relaxing the long-only constraint. Continued success will surely result in a proliferation of managers not just in US equity but other asset classes.”
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