Market Neutral Fund
What it is:
How it works (Example):
A market neutral fund namely generally holds both short and long share positions in specific stocks and it holds stocks that the fund managers view optimistically as well as pessimistically. Gains on short sales are distributed as cash.
Why it Matters:
Market neutral funds feature frequent buying and selling by the fund managers. For this reason, market neutral funds are actively managed funds that charge higher-than-average management fees to holders. Evaluating the fund's manager is generally the best way to determine if the potential returns are higher than the fees you will be charged.