A market-neutral fund holds long and short positions in the same and related sectors, so the market's direction largely cancels out. It profits if its longs beat its shorts.
What the video says
In hedge funds, a fund can try to make money, whatever the market does. It's called market neutral. It owns some stocks, and bets against others in the same sectors. Say a hundred million long, and a hundred million short. Now the market falls ten percent. Longs lose ten. Shorts gain ten. Net: zero. What matters is the gap between the two. Say its longs fall only five, and its shorts fall fifteen. That's a gain of ten million, in a falling market. If its picks are wrong, it can lose, even in a rising market. So why do investors care? The return comes from picking, not from the market's direction. Not up or down. Better or worse.
In the glossary: Long/short equity
A simple example with round numbers, not advice. Terms vary by fund.
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