Long–short strategies have generated controversy and institutional interest for more than 10 years. We analyzed the efficiency gains of long–short investing, where we defined efficiency as the information ratio of the implemented strategy (the optimal portfolio) relative to the intrinsic information ratio of the alphas. The efficiency advantage of long–short investing arises from the loosening of the (surprisingly important) long-only constraint. Long–short and long-only managers need to understand the impact of this significant constraint. Long–short implementations offer the most improvement over long-only implementations when the universe of assets is large, asset volatility is low, and the strategy has high active risk. The long-only constraint induces biases (particularly toward small stocks), limits the manager's ability to act on upside information by not allowing short positions that could finance long positions, and reduces the efficiency of traditional (high-risk) long-only strategies relative to enhanced index (low-risk) long-only strategies.