I am trading a market neutral long/short equity portfolio. Right now I am trading cash equities, but I am interested in replacing some or all of the cash equities with derivatives, either single stock futures or equity swaps. I would like some input if anyone has an opinion about the cheapest instrument, and any hidden drawbacks.
I see that PanAgora's market neutral fund holdings are entirely total return swaps, which suggests to me that total return swaps are cheaper than trading the cash equities. https://www.putnam.com/literature/pdf/HL801-243c30e4224a0252fbb41730483c3f49.pdf Could there be another reason that they choose total return swaps?