Definitions Net exposure is the total funds invested in a market at any one moment.
Let us consider the example of a fictional investment fund "Xfund" who invest their customer's money for them. They currently have $2bn invested in equities and $500m in cash.
- $500m Cash
- $2 bn Equities (Stocks and Shares)
The funds net exposure in this case is $2bn. (Article continues below)
Investors expose themselves to the market, surfers expose themselves to the sea.
Exposure means Risk
"Exposure" implies that a risk is being taken. By investing in stocks and shares the funds is risking it's customers money. In this case the funds is "risking" $2bn.
Reducing Net Exposure
If the fund managers feel that now is not a good time to invest in stocks and shares they can reduce their exposure by selling.
Increasing Net Exposure
Conversely the fund can increase its net exposure by purchasing more shares.
