130/30 Funds the Evolution of Active Equity Investing
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Author
Weigand, Robert A.
Weber, Florian
Krusen, Charles
Publisher
Washburn University. School of Business
Sponsor
Kaw Valley Bank
Issue Date
March 2008
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Alternative Title
Abstract
We analyze the confluence of factors contributing to the momentum in the 130/30 space, including the product's strong theoretical underpinnings and appropriateness for investors' objectives in the 21st century. We discuss quantitative and fundamental approaches to 130/30s and present evidence on product performance and fees, which will also influence the pace of adoption of active extension strategies. Aggregate performance data indicates that 130/30s have outperformed long-only portfolios by 300-350 basis points per year over the past 3-5 years. Based on these factors, we predict that 130/30s will continue evolving as key component of investors' equity allocation, and that investors are on their way to becoming as comfortable with 130/30 funds as they are with other approaches to active investing.