A mutual fund that has long positions and short positions in its portfolio. Specifically, in a 130/30 mutual fund, the fund is long 100% of its assets, and in addition it shorts 30% of the value portfolio and uses the cash received in the short sale to invest long in more assets. So in total, the fund is 130% in the long portfolio and 30% in the short portfolio, hence 130/30.
Watch: Mutual Funds
For example, if the fund is worth $100, it would invest the $100 in equity and then would short $30 worth of equity. In a short sale, the fund receives $30 cash and uses that $30 to invest long in more assets. So the fund is now long $130 and short $30. This is a popular strategy because it allows the manager to invest $160 for every $100 the investor puts into the fund.
