Natixis Funds: 130/30 strategy

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130/30 strategy

130/30 is a type of long/short fund strategy.

Long positions

When a fund takes a long position in a security, it purchases the security outright for its portfolio. Funds take long positions in stocks that the portfolio managers believes are attractive.

Short positions

A 130/30 fund can take short positions in stocks that the portfolio manager believes are overvalued or expected to underperform. To take a short position in a security, funds borrow the security and sell it to a buyer at the current market price. To complete or close out the short sale transaction, the fund buys the same security in the market and returns it to the lender.

The fund generally makes money on a short position when the market price of the security goes down after the short sale. In this situation, the fund has sold the security to the buyer at a higher price.

After the price of the security drops, the fund is able to replace the security it borrowed at the new lower price.

Conversely, if the price of the security goes up after the sale, the fund will lose money because it will have to pay more to replace the borrowed security than it received from the buyer.

Picturing 130/30

Because a 130/30 fund will generally use the proceeds from its short positions to purchase additional securities, the fund will normally hold long positions up to 130% of its net assets. The following chart illustrates how a 130/30 strategy works:

While 130/30 strategies offer the potential for long-term capital appreciation, they employ a growth investment style that focuses on future expectations of a security. As a result, these strategies are exposed to greater volatility if these expectations are not met. The use of leverage will make any change in a 130/30 strategy even greater and thus result in increased volatility of returns. Short sales expose 130/30 strategies to the risk that they will be required to buy the security sold short at a time when the security has appreciated in value, thus incurring a loss.

For more complete information, including a prospectus, please contact your financial advisor. You may also view a current prospectus online, order literature through our site, or contact an Investor Service Representative at 800-225-5478. Investors should consider a fund's objective, risks and expenses carefully before investing. This information, and other information, can be found in the fund's prospectus. Please read the prospectus carefully before investing. Other expenses, including sales charges, apply to a continued investment in the fund and are described in the fund's current prospectus.

The mutual funds referred to in this website are offered and sold only to persons who are eligible to purchase U.S. registered investment funds and are offered by prospectus only.