A long short fund invests in the public stock market. Long short funds aim to make equity like returns with less volatility than long only equities funds, and with low correlation to the equity markets it invests in.

The fund manager assesses the fair value of listed companies, looking for potential investment opportunities when the share price of a company is well below its fair value (for long positions), or well above its fair value (for short positions).

The fund manager aims to buy shares with the objective of selling those shares at a later date at a higher price to make a profit (long positions). The manager also aims to sell shares (short sell) that have been lent to the fund, with the objective of purchasing those shares at a lower price to make a profit (short positions).

A long short fund is different to a long only fund because it takes both long and short positions. A long only equities fund only holds long positions in the fund, investing in companies only where they believe the share price will go up.