The ethics of shorting and the risk of “infinite” losses

4 min read
Download article

The market for short selling is a well-developed, relatively large and liquid one in Australia, but the practice of ‘shorting’ remains controversial and raises several issues that investors need to consider. These include questions on the ethics of short selling and the risk of “infinite” losses if the company’s share price rises rather than falls.

To maximise our returns from active share portfolios IFM Investors employs short selling judiciously and with a number of strict controls to help us manage the inherent risks involved in shorting stocks and help insulate IFM’s portfolios from the potential of an “infinite” shorting loss. We believe they have also contributed to the much more symmetric and better behaved stock contribution from shorting that has flowed into the performance of IFM’s portfolios in recent years.

Download article

Meet the author


Mark McClatchey

Mark is responsible for research, team management, portfolio management and corporate assessment. Mark has a 31 year track record in equity markets. He previously spent more than 16 years at AMP, where he was Head of Multi-Strategy Research. Mark headed-up the team from 1999, expanding into long-short investing and establishing an Asia-Pacific market neutral strategy.