When long-only beats long/short (and why)

Intuition says long/short is “more sophisticated” and therefore better. Not always. The short leg pays borrow cost and, in rising markets or ones that punish shorts, it subtracts more than it protects.

We've seen cases where the edge lives almost entirely in the long leg: overweighting the good adds value, but underweighting the bad barely contributes once you subtract the cost of shorting.

Practical takeaway: long-only isn't “the simple version”, sometimes it's the honest version. Adding shorts must be justified with net numbers, not aesthetics.