Glossary

Long

Owning an asset , having an interest in the price of a security going up.

Context: See short. This is a real piece of financial jargon! One of those boys in braces might be overheard saying “I’m long two holidays in the Algarve – can anyone take one off me?” which translated means “I’ve booked a couple of holidays in the Algarve, but does anyone want to buy one from me?” presumably because his intended companion has just refused to go.

You can be “long” of something through derivatives, or through owning the security itself. Sometimes (although not always) being “long” can mean overemphasising a particular factor, as in “the bond portfolio is long duration” which means that it is more sensitive than the index to changes in interest rates. A fund manager might say, “we’re long oils and short food processors”, which could (in a long only portfolio) mean that the portfolio is overweight oils and underweight food processors relative to an index position. If it’s in a portfolio which is allowed actually to go short, it means something else: that the portfolio holds oil stocks and has sold food processing companies it doesn’t own. Sometimes “long” can be used to describe a position which has arrived as a side effect of another: “we’re overweight UK equities and UK gilts, so relative to the average pension fund portfolio, we’re long sterling”. If you’re not entirely clear which of these various uses of “long” is being made, ask!

Long or “long-dated” gilts, however, are gilts which pay back the capital the government borrowed a long way into the future. They will have longer duration than a gilt which repays its capital earlier – but “long” in this case simply refers to the length of time for which the bond will be in existence.