It is given that due to operational aspects of short selling, dedicated short selling or short biased strategies should be maanged by Limited partnerships
why so ?
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Short selling involves borrowing shares from a broker and selling them with the hope that the price will fall, allowing the investor to buy the shares back at a lower price and make a profit. However, short selling is a risky strategy as there is unlimited potential for losses if the price of the shares being sold increases instead of decreases.
To manage this risk, short sellers often use a variety of strategies, including dedicated short selling or short biased strategies. These strategies typically involve a high level of risk and are therefore best managed by limited partnerships rather than other investment structures.
Limited partnerships are a popular structure for managing short selling strategies because they provide a range of benefits to investors, including limited liability and tax advantages. Additionally, limited partnerships provide a clear separation between the general partner, who is responsible for managing the fund, and the limited partners, who are responsible for providing capital to the fund.
This separation of roles helps to ensure that the general partner has the expertise and experience necessary to effectively manage the short selling strategy, while the limited partners have limited exposure to the risks associated with the strategy. This makes limited partnerships an ideal structure for managing dedicated short selling or short biased strategies.