Answer transcript: Mutual funds are not allowed to short-sell. Short sell is when investors have a negative opinion about a company and in anticipation of a price decline, they sell some shares and are required to return an equal number of shares at some point in the future to pocket the profit. Mutual funds are allowed to do hedging. There are arbitrage mutual funds, where they buy the stock and sell the future. Funds are allowed to do stock lending which has not taken off really well.