130/30 Funds the Evolution of Active Equity Investing
Weigand, Robert A.
Washburn University. School of Business
Kaw Valley Bank
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.