Hall, whose fund has outperformed the FTSE All-Share Total Return Index by 14.3 per cent since launch and by 13.5 per cent over the past year, says the active extension concept can, if properly harnessed, offer investors a powerful alternative to long-only funds in both bull and bear market conditions.

"The 130/30 or active extension concept is flexible enough to generate additional positive performance in a rising market and outperformance in a falling market,' he says. 'Active extension funds are not hedge funds or absolute return products, but their ability to short stocks does offer an extra source of outperformance in turbulent markets. These strategies offer a major advantage over traditional long-only funds; they permit the manager to sell 30 per cent of the fund's assets short and reinvest the proceeds in an additional 30 per cent of long positions to generate outperformance. Maximising this advantage, however, depends on the ability of the manager to generate alpha from both the short and long book."

Cartesian's long/short investment process - also deployed in the management of the Cartesian UK Equity Long/Short Fund - is suited to running short extension strategies such as the Cartesian UK Equity 130/30 Fund.

"Our investment process is plain vanilla and has not been adapted to fit this fund - our process already suited 130/30 very well,' says Hall. 'Active extension strategies are not new to Cartesian as we have run similar funds before as a team. To make the most of 130/30 you need to be able to generate alpha from both your long and short books and we have a proven record of doing that. Our experience and process has been a key contributor to our strong relative performance and differentiates us from our peers."

Although 130/30 funds are often criticised for being riskier than their long-only counterparts, Hall says that, in practice, a good fund manager will be able to mitigate most, if not all, of any additional risk.

"If the manager is skilled at stock selection and portfolio construction any incremental risk borne by the investor should be compensated for by additional excess return. It is also important to remember that the 30 per cent of extra long positions is offset by the 30 per cent sold short, so a 130/30 or active extension portfolio will have a 100 per cent net exposure to the market and will, therefore, have a similar market risk as an equivalent long-only fund. "

Hall believes active extension funds should appeal to most types of investors.

"Active extension funds offer the kind of flexibility long-only funds simply cannot match. Active extension strategies, as proven by Cartesian, can add considerable alpha in all market environments, making them credible additions to any well diversified portfolio. As advisers and investors realise the ability and potential of active extension funds, their appeal will spread beyond the institutional market place where they are well understood. Whilst this will take time we believe they will become commonplace in retail portfolios in the near future."