Zenith's Long/Short Sector Review found that 'active extension' and 'variable beta' fund managers outperformed the S&P/ASX300 by 0.3 per cent for the year to 31 May 2015.
The outperformance was achieved with an average of approximately 80 per cent market exposure and with lower volatility than the broader markets, said the report.
Zenith senior investment analyst Rodney Sebire said recent market conditions have been ideal for long/short strategies.
"Some of the key determinants for success in long/short have been in place – a low correlation of performance between industry sectors and high performance dispersion within sectors.
“By way of example, the healthcare and telecommunication sectors returned 33 per cent and 24 per cent respectively over the last 12 months, versus energy and consumer staples, which returned -15 per cent and -7 per cent, respectively," he said.
There haven't been a lack of opportunities on the short side either, Mr Sebire said.
"From a market value perspective, Woolworths and Orica were two of the most heavily shorted companies," he said.
"Woolworths has suffered from declining margins and losses from its Masters business, while Orica navigated a change in chief executive and declining demand for its explosives products," Mr Sebire said.
The "conducive environment" for long/short investing is likely to continue over the next 12 months, he said.
"Zenith expects further mean reversion in those sectors that have been artificially inflated by the yield trade; the likes of financials (banks), telecommunications, healthcare and property.
"This should create opportunities for appropriately skilled long/short managers," he said.
AMP names incoming chief risk officer
Antares Equities hires new director
Former AFA CEO appointed to boutique board
Busting common passive investing myths
The long-term case for real estate
Shining a light on investment options