Search for the best long/short equity ETF and you expect a menu. What comes back is a short list, mostly American, wrapped in a structure that quietly works against the strategy it holds.

Key takeaways

• A long/short equity ETF buys shares it expects to rise and sells short shares it expects to fall, inside a listed fund you can trade on-exchange through the day.
• Genuine examples are few and nearly all US-listed, First Trust’s FTLS, AGF’s BTAL and Simplify’s EQLS, and none carries the disclosure document EU and UK retail investors need to buy it directly.
• Against a hedge fund the ETF wins on cost and transparency, but daily holdings disclosure and daily dealing cap how hard it can run the short side.
• For most investors outside the US, the accessible long/short route is a UCITS fund or an investment trust, not an ETF.

The phrase “best long/short equity ETF” assumes a shelf full of products to rank. It is worth checking that assumption before you start comparing tickers, because the shelf is mostly empty, and where it isn’t, the geography matters more than the fund name.

A long/short equity strategy is one of the oldest ideas in professional investing: own the companies you think will do well, sell short the ones you think will do badly, and profit from the gap between them regardless of which way the wider market moves. The strategy is common. Packaging it inside an exchange-traded fund is not. Which long/short equity ETFs genuinely exist, why the list thins out to almost nothing once you leave the US market, and how the wrapper compares with the two vehicles most investors are really weighing it against, a mutual fund and a hedge fund, decide whether the search term leads anywhere useful.

What a long/short equity ETF actually is

An equity long/short ETF runs two books at once. The long book holds shares the manager rates highly. The short book borrows shares the manager rates poorly, sells them, and aims to buy them back cheaper. The fund’s return comes from the spread between the two, plus or minus its net exposure to the market. All of it sits inside a single listed fund with one price you can trade intraday.

The label covers a range. A market-neutral fund holds roughly equal long and short exposure, so its market direction cancels out and it lives or dies on stock selection. A variable net-long fund keeps a permanent long tilt and uses shorts to soften drawdowns rather than to erase market exposure. Both get filed under “long/short equity,” and the difference decides almost everything about how the fund behaves. Confusing the two is how investors end up disappointed.

The best long/short equity ETFs: what genuinely exists

Strip out the thematic and country trackers that get mislabelled as long/short, and the field of true long/short and market-neutral equity ETFs is small. These are the funds that verifiably run the strategy, built from issuer data as at 2026.

First Trust’s FTLS is the largest of the three by a wide margin, at roughly $2.43bn in net assets as at 8 July 2026. It is worth being precise about what it does, because the name oversells the “short” half. Under its own prospectus the fund runs 80-100% long and 0-50% short, meaning it is a net-long US equity fund with a variable short overlay, not a balanced hedge against the market. The advisor can shrink or remove the short book entirely when it chooses. Investors expecting downside protection in every sell-off are reading the label, not the mandate.

AGF’s BTAL is the closer thing to a true market-neutral position. It holds long positions in low-beta US shares and short positions in high-beta US shares, dollar-neutral within each sector, so it is engineered to gain when high-beta stocks fall behind low-beta ones. Its headline management fee is 0.45%, though the dividend and borrowing costs on the short book push the total expense higher, a structural feature of any fund that holds short positions. Around $280m in assets makes it a genuine, investable fund rather than a token listing.

Simplify’s EQLS shows the other end of the range. It uses total-return swaps to build roughly 200% long and 200% short exposure across a quant-ranked basket, rebalanced monthly, at a 1.00% expense ratio. It is also tiny, a few million dollars in assets, which is its own data point. A market-neutral equity ETF that a large US manager launched and that still sits near $5m tells you how thin real investor demand for the wrapper has been.

That is close to the whole list of scaled, verifiable long/short and market-neutral equity ETFs, three funds worth naming, one of which barely trades.

Why the list is so short outside the US

The funds above share a listing exchange for a reason. True long/short and market-neutral equity ETFs are overwhelmingly US products, and the barrier for everyone else is regulatory, not a lack of interest.

Since 2018 the EU’s PRIIPs regulation has required any packaged investment sold to EU retail investors to come with a standardised Key Information Document (KID); the UK kept the same rule after Brexit. US ETF issuers do not produce one, partly on cost and partly because the KID’s prescribed forward-looking performance scenarios sit awkwardly with US securities law. Brokers are obliged to block the sale where no compliant KID exists, so US-domiciled ETFs have been pulled from most EU and UK retail platforms. FTLS, BTAL and EQLS are not banned strategies, they are simply unavailable to a retail investor in London or Frankfurt through normal channels.

The obvious fix would be a long/short equity ETF built as a UCITS fund, the EU-regulated wrapper that European brokers can sell freely. In practice these barely exist. The European liquid-alternatives industry runs long/short equity mainly as UCITS funds, priced once a day, not listed, such as the Schroder GAIA range or newer launches like the Calibrate and Tycho CapeView European long/short funds. Others reach retail investors as closed-end investment trusts. Where a hedge-fund-style strategy has made it into a European ETF at all, it tends to be something like the iMGP DBi Managed Futures UCITS ETF, which launched in 2025 at a 0.75% total expense ratio, but that is a multi-asset managed-futures strategy trading long and short through futures, not a clean long/short equity book. The pure long/short equity ETF that a European retail investor can buy is, as far as issuer listings show, close to non-existent.

ETF vs mutual fund vs hedge fund: cost, transparency, liquidity, structure

The reason to want the ETF wrapper at all is that it improves on the alternatives on four specific measures. Set the same long/short equity strategy inside each vehicle and the differences are concrete.

Cost. An ETF publishes a single total expense ratio and, in FTLS’s case, charges a 0.95% management fee. A hedge fund running the identical strategy typically charges “2 and 20”, a 2% management fee plus 20% of profits, so the manager takes a fifth of the gains before the investor sees them. A mutual fund sits between the two. On fees alone the ETF is the cheapest way to rent the strategy, before you even count the performance fee a hedge fund keeps.

Transparency. An ETF discloses its full holdings every day. A hedge fund reports long US positions to the SEC on a Form 13F, but only quarterly and with a 45-day lag, and shows nothing of its short book. A mutual fund discloses periodically, monthly or quarterly. If you want to see exactly what you own, the ETF is the only one of the three that shows you daily.

Liquidity. ETF shares trade on-exchange throughout the session, so you deal intraday at a live price. A mutual fund strikes one price per day at a single valuation point, and you deal at that. A hedge fund is the least liquid: lock-up periods, redemption notice, and gates can keep your money in for months or quarters. An ETF holder can sell whenever the exchange is open, which a hedge fund investor frequently cannot.

Structure. All three are pooled funds, but the ETF is an open-ended fund whose assets are held separately by a custodian and ring-fenced from the provider’s own balance sheet, with authorised participants creating and redeeming shares to keep the market price near the value of the underlying holdings. That segregation is why an ETF provider going bust does not, by itself, put the fund’s assets at risk.

The trade-off: why the wrapper fights the strategy

The same four features that make the ETF attractive are exactly what make it a hard home for a shorting strategy, and that tension explains why the shelf is so thin.

Daily transparency means a long/short equity ETF must publish its short positions to the market every day. A hedge fund guards those precisely because a visible short is a target: other traders can push the price against a fund that has to keep rolling or covering it. Daily liquidity means the manager must be able to unwind positions on demand, which pushes the fund toward liquid large-caps and away from the smaller, harder-to-borrow names where short selling often pays best. And short positions carry costs a long-only fund never sees, stock-borrow fees and the dividends owed on borrowed shares, which is why BTAL’s true running cost sits well above its 0.45% management fee. The wrapper that makes the strategy cheap and visible also blunts its edge.

None of this makes shorting itself retail-friendly. Doing it directly, through leveraged or margined products, is a different risk class again: the FCA describes contracts for difference and similar speculative products as “complex, high-risk” instruments, and notes that around 80% of retail accounts lose money trading them. A long/short equity ETF exists partly so investors are not tempted to run a short book themselves. The point of the packaged fund is that a professional manages the short side inside a regulated structure, but that same structure is why so few of these funds get built, and why the search for the best long/short equity ETF leaves most investors, especially outside the US, choosing from a list of three rather than thirty.

FAQs

Are there any long/short equity ETFs a UK or EU investor can buy?

Directly, almost none. The scaled products, FTLS, BTAL, EQLS, are US-listed and lack the PRIIPs Key Information Document that EU and UK brokers require, so retail clients are blocked from buying them. The accessible route for a long/short equity strategy in Europe is usually a UCITS fund or an investment trust rather than an ETF.

What is the difference between a long/short equity ETF and a market-neutral ETF?

Net exposure. A market-neutral fund such as BTAL holds roughly equal long and short exposure so the overall market direction cancels out and returns depend on stock selection. A variable net-long fund such as FTLS keeps a long tilt and uses shorts to reduce risk, so it still moves broadly with the market. Both are labelled “long/short.”

Why is FTLS’s expense ratio higher than a normal equity ETF?

Because it holds short positions. Its management fee is 0.95%, but the total expense of 1.38% includes the cost of borrowing shares and paying the dividends owed on them. Any fund that shorts carries these costs, which is why long/short ETFs look expensive next to a plain index tracker.

Does a long/short equity ETF protect you in a market crash?

It depends on the fund’s net exposure, and the label alone will not tell you. A market-neutral fund is built to sidestep market direction; a net-long fund like FTLS can cut but not eliminate its market exposure, so it can still fall in a broad sell-off. Read the mandate, the split between long and short, not the name.

Next read

Long/short equity strategy: approaches, risk controls and portfolio construction, how the strategy is actually run, before you judge any wrapper built around it.