American Century Investments has introduced a new fund that will combine long- and short-term portfolio strategies to garner consistent returns.
The American Century Long-Short Equity Fund will hold certain stocks long term, while short selling other positions.
"The equity markets are challenging, to say the least, and we believe by removing the long-only bias in stock selection, our mutual fund can provide investors with transparency and daily liquidity, and, at the same time, offer new processes designed to benefit from volatile capital markets," said John Schniedwind, chief investment officer for American Century's quantitative equity group.
Kurt Borgwardt, who now manages American Century's $3.7 billion Growth and Income Fund, will run the Long-Short Fund with Zili Zhang, American Century's director of quantitative research. In addition, a team of 14 will be responsible for creating stock models for the new fund.
Borgwardt compared the fund's plan to buy stocks the team considers overpriced, only to then sell short, to the way hedge funds are managed. "Our key investment goal is to protect investors from the ups and downs of the overall market," Borgwardt said.
Short selling, by which managers borrow and then sell securities they expect will drop in value, only to buy them back at bargain prices, can be risky, but Borgwardt said managers would monitor stocks closely to ensure better bets.
The fund's expenses will be 2.38% per year, including a 1.38% management fee. It will strive to generate returns that outpace the Citigroup Three Month Treasury Bill by between 4% and 5%.