Short selling
Short selling (also known as shorting or going short) is the practice of selling an asset that you don’t actually own, in the hope that the price will decline and you can buy it back in the future at a lower level. You can then keep the difference between the price at which you sold the assets and the lower price you paid to buy them back.
When taking a short position in shares, for example, the shares are borrowed from a third party – usually a broker – and then sold. The short seller may have to pay a fee to borrow the securities and have to reimburse the lender for cash returns the lender would have received had the securities not been loaned out. When the securities are repurchased they are then returned to the lender.
Some of the underlying International Equities Managers we invest into have the ability to short stocks. This can be helpful as, if executed wisely, it can limit or even reverse negative returns in falling markets.