New York Life Investment Management introduced its first 130/30 strategy, said Tony Elavia, senior managing director of the firm's quantitative equity strategies group. "Because of (NYLIM's equity investors group's) quantitative expertise, our absolute-return strategies serve as a logical product extension of existing capabilities. Our quantitative models used for long-only strategies are forecasting alphas for the entire benchmark universe. But long-only constraints have restricted our managers' ability to fully capitalize on our research. Through shorting, absolute-return strategies will allow our portfolio managers to maximize ... research capabilities," said Mr. Elavia.
Typically, a 130/30 manager will run an index through a mathematical model that screens the stocks for various fundamental pricing factors and then shorts the stocks that have negative characteristics.