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I'm reading Qian, Hua and Sorensen's Quantitative Equity Portfolio Management and one part in section 2.3.2 (page 44) states that:

"For a long-only portfolio managed against a benchmark, the active portfolio will have a beta bias, affecting its relative return against the benchmark. For instance, suppose the active portfolio is low beta, at 0.9. Then a market return of 5% will cause an underperformance of 0.5% (= 0.1 · 5%) or 50 basis points by the portfolio. For a long-short market-neutral portfolio, this translates to a pure loss of 50 basis points."

I'm not understanding that last sentence - won't we technically have made 4.5%, which is less than the benchmark but still positive in a market-neutral sense?

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I suppose the long-short-market-neutral portfolio has a benchmark return of 0. A performance of -50bp is then just underperformance of 50bp.

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