should be considered alongside gross exposure
may not reflect sector or other specific risksexample of net exposurelooking at how a fund s net exposure varies over the months or years and its impact on returns gives a good indication of the managers commitment to and expertise on the short side and the fund s likely exposure to swings in the market the years 2020 2022 were extremely volatile with large up and down stock market moves driven by covid 19 and geopolitical events making it a potentially tough period for some hedge funds however many contained the damage by reducing their net exposure in certain sectors according to a morgan stanley survey 1 gross exposures declined as well reflecting a reduction in the use of leverage to boost returns with quant traders cutting total equity exposure toward the lowest in a decade 2as a concrete example say that an investor is long an index portfolio that tracks the s p 500 with a gross exposure of 1 million the investor then sells short 50 000 worth of apple shares anticipating an earnings miss apple is the largest component of the s p 500 index so that position reduces the net exposure since there is an existing long position implicit in the index portfolio 