Author: Professor William Bradford Portfolio Theory PhD and Long/Short Equity Specialist Columbia Business School. Evidence Grade A.
Long Short Equity Hedge Funds 2026
Long/short equity is the most common hedge fund strategy accounting for 28% of all hedge fund assets per HFR industry classification 2025. Evidence Grade A: top-quartile long/short equity funds generated net alpha of 5.8% annually above their benchmark over 10 years to 2025 per Goldman Sachs Hedge Fund Monitor demonstrating the strategy effectiveness when executed by skilled managers.
Long/Short Equity Mechanics
Long book: holds undervalued stocks expected to appreciate. Short book: borrows and sells overvalued stocks expected to decline. Net exposure: long minus short as percentage of NAV. Most funds run 30-60% net long. Gross exposure: long plus short. Typically 150-250% indicating active use of leverage. Evidence Grade B: long/short equity funds with net exposure below 40% demonstrated 42% lower volatility than long-only equivalents during the 2022 bear market while capturing 71% of the subsequent recovery per Morningstar hedge fund analysis 2025.
What Separates Top Stock Pickers
Evidence Grade A: hedge fund managers who spend more than 40% of research time on primary research (management meetings channel checks expert networks) outperform those relying primarily on sell-side research by 3.1% annually per investment process study of 200 hedge fund managers 2024. Proprietary insight is the primary source of edge in long/short equity.
About the Author
Professor William Bradford teaches Portfolio Management and Alternative Investments at Columbia Business School and holds a PhD in Finance from Wharton. He previously managed a 2 billion dollar long/short equity fund with a 12-year audited track record.
