Personal Finance Questions and Answers for Young Professionals

11 Responses to “Fidelity 130/30”

1. 
   pbucelwicz Says:
   April 10th, 2008 at 8:00 am

   This sounds like a very good idea. I found this link with info on a Fidelity 130/30 investment. Is this what you are talking about?

   http://personal.fidelity.com/products/funds/content/UnderstandingMutualFunds/fidelity_130-30_large_cap_fund.shtml.cvsr?refhp=pr

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2. 
   vadim.vintsevsky Says:
   April 10th, 2008 at 8:31 am

   Exactly. I really like the idea, allows the mutual fund to kind of protect itself from a market drop. I am wondering if the SEC rules are going to get more relaxed to the point where they can start shorting alot and using alternative investment stategies more.

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3. 
   pbucelwicz Says:
   April 10th, 2008 at 8:36 am

   Right, I think they should be allowed to do what ever they want to make money, as long as the share holders know all the risks involved. I know shorting is used at corporate investing companies.

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4. 
   vadim.vintsevsky Says:
   April 10th, 2008 at 9:06 am

   I think the only problem with that is that a lot of people put money into mutual funds for saftey reasons to diversify their protfolios. If they start using alternative stategies they get that much riskiers. But I like having specific stategies like the 130/30.

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5. 
   pbucelwicz Says:
   April 10th, 2008 at 9:24 am

   I agree but I think most people who pick their mutual funds will look at what risk it has. If they are looking for growth they will be in aggressive funds. This sounds like it’s an aggressive strategy that people would be willing to take.

   How “new” is this 130/30 fund? Where would someone invest in it. Self directed? 401k, IRA?

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6. 
   vadim.vintsevsky Says:
   April 10th, 2008 at 10:07 am

   I recieved an email when it launched and I think it was earlier this week. I think this is a great fund for anybody to invest, in no matter their investment type, to diversify their portfoilo. Especially for retirment accounts for young individules

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7. 
   MDH Says:
   April 10th, 2008 at 3:21 pm

   Vadim,

   I would be careful saying that the fund has downside protection by being able to go short…remember those short proceeds extend the long portfolio to 130%…at the end of the day your net exposure to the market remains 100% (130 long/(30) short).

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8. 
   pbucelwicz Says:
   April 11th, 2008 at 7:53 am

   Isn’t there a huge risk when shorting stocks that will under perform? You can make money off a declining stock price, but there is no limit to how much you can lose if the stock price shoots up right?

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9. 
   sergik12 Says:
   April 11th, 2008 at 12:38 pm

   My company has been running a 130/30 for a few years now. State Street runs a huge international 130/30 fund. The 130/30 is relatively new but it is almoust the same thing as the market neutral strategy which mutual funds already run.

   I think the original guy who invented 130/30 is Andrew W. Lo from MIT. I went to a presentation by him on 130/30. He is a very smart guy. If you guys want to find out more about just download his paper.

   Here is the link:

   http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1074622

   130/30 FUND

   High-conviction funds, beta-one funds, short extension funds, limited-shorting funds, long-enhanced funds, active extension funds, hedge-fund lite: there is a wide range of terms for what is most frequently called 130/30. Broadly, this strategy initially invests 100% in an index, sells short 30%, and uses the proceeds from the shorts to buy an additional 30% likely to beat the benchmark.

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10. 
    sergik12 Says:
    April 11th, 2008 at 12:42 pm

    MDH good point, there is really no down side protection. You are just taking a bet that your worst rated stocks will under perform and using the proceeds from that bet to make a bet on your best rated stocks.

    Reply

11. 
    corporate business credit card Says:
    June 25th, 2010 at 12:04 am

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    Reply

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