What is the main objective of long/short equity strategies?

The main objective of long/short equity strategies is to balance long and short investment positions. This approach allows investors to take advantage of market inefficiencies by buying (going long on) undervalued stocks while simultaneously selling (shorting) overvalued stocks. By maintaining both long and short positions, the strategy aims to capitalize on the appreciation of long positions combined with the depreciation of short positions, which can potentially lead to profits in both rising and falling markets.

This balance between long and short positions not only enhances the chance for returns but also helps to manage risk. While being long on certain equities can yield positive returns, having short positions serves as a hedge against market downturns. Therefore, the dual-focus of the strategy enables managers to navigate various market conditions effectively.

Other options do not align with the core goal of long/short equity strategies. An approach focused solely on short selling doesn't capture the full essence of the strategy, which inherently involves both long and short positions. While achieving a completely market-neutral standpoint might be a goal for some strategies, it is not the primary objective of long/short equity strategies, which seek to exploit market discrepancies. Investing only in underperforming assets ignores the long side of the strategy, where capital is also deployed