Long/short: Schwab's margin risk addendum is worth reading

Concise and helpful

Basis Northwest 2026 is sold out.

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Risks and costs are not inherently bad. The decision to allocate turns depends on whether these things are well compensated.

Tax-aware long/short strategies like 130/30, 250/150, etc., are white hot.

I estimate AUM north of $150 billion, up from $10-$20 billion just 2 years ago.

Tax-aware long/short grows to $150+ billion AUM

Getting up to speed on tax-aware long/short? Start here.

I get a few emails a week about how the strategy might be oversold, how many new entrants have come to market, and how advisers are seduced by the tax benefits, forgetting to consider whether the risks and costs are appropriately managed and well compensated.

So, Schwab’s recently released addendum to its margin disclosure statement for long/short strategies is especially timely.

The addendum doesn’t mention the reason for even considering tax-aware long/short, which, it’s worth repeating, should be pretax alpha.

It’s more of a cost, mechanics, and risk management document, and I found it very concise and helpful.

Here are a few takeaways…