Use of short selling Sample Clauses

Use of short selling. Short selling involves the sale of Securities that the fund manager does not own and therefore have to be borrowed for delivery to the purchaser, with a corresponding obligation to the lender to replace the Securities at a later date. Short selling allows investors to profit from declines in market prices to the extent that transaction costs and borrowing costs are exceeded. Alternative Investments often use short selling to reduce their “net exposure” to the market (this being the sum of their long and short positions) and to profit from the anticipated decline in the price of a security. An appreciation of a short position results in a loss. Purchasing Securities to close out short positions can itself cause the price of the Securities to rise further, thereby exacerbating the loss. Critically, the running of a short position normally gives rise to unlimited liability because there is no maximum upside price for a security which has ultimately to be covered. For this reason, fund managers tend not to disclose their existing book of short positions either to investors or to the market, and they tend to manage their short positions with very tight risk controls in place.