Less than two years ago, investment managers were scrambling to launch their own 130/30 funds, but interest has cooled significantly after these funds largely failed to perform in the recession.

The 130/30 strategy, also known as active-extension strategies, uses 100% equity leveraging to increase risk, resulting in magnified gains and losses. The funds offer highly skilled managers an opportunity to outperform the market, but in the six months ending March 31, 130/30 funds collectively plunged 32.9% from $47.02 billion to $31.56 billion.

JPMorgan Asset Management saw assets in its 130/30 fund fall 21.8% during the six-month period, to $7.77 billion, according to a survey by Pensions & Investments, and Barclays Global Investors' 130/30 fund assets dropped 29.3% to $7.04 billion during the same period. In fact, nearly every 130/30 fund manager saw double-digit asset declines.

"It's an investment in stocks where the manager has more tools to add value, but net-net, you are still fully invested in stocks," said Paul Quinsee, chief investment officer of core U.S. equity for JPMorgan. "All equity strategies have fallen in that period, and 130/30 is no exception to that."

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