My long term investment goal is to grow my BTC position (regardless of current exchange rate in terms of USD).
For making more bitcoins, I guess you need not looking for shorting altcoins. Making use of altcoin trading and just holding bitcoins will help you to earn better in more effective way within short period of time than you expect.
I am not looking for a profit from the short. I want to hedge my investments, so that I have a net neutral position in that currency while investing in it. To help illustrate, I'll give you an example.
Let's say that I can earn 3% return on an investment by paying the borrower 100 LTC for a period of time. However, according to my stated investment goals, I do not want to be exposed to the risk of fluctuations of LTC.
So
1) I buy 100 LTC with my BTC
2) I make the investment
3) I short a further 100 LTC
This has the effect of canceling out the gains or losses from changes in the value of LTC relative to BTC, leaving me with only the stated 3% goal (minus the fees and vig of these transactions).
While many investors use shorting as a high-risk/high return method of investing, using shorts in this way is a more traditional method of hedging an investment of activity.
Is there any specific reason that makes you lend in LTC instead of BTC? You could avoid the risk of the exchange rate changes, if you keep your invesments in BTC and also lend in BTC.
Does lending in LTC offers better ROI? If yes, do you trust BTC much better than LTC and this is why you won't keep a smaller part of your investments in LTC on the long run?
If you trust both BTC and LTC, why don't you just keep a constant amount of LTC (let's say 100 LTC) and lend it to borrowers again and again? In this case, if you really don't want to grow your LTC position but only BTC, you only need to hedge your 3% ROI (3 LTC) and you're protected, you can exchange it to BTC without worrying about the exchange rate anytime. This costs much less (to hedge only 3 LTC compared to 100 LTC).
Or LTC was just an example, and you plan to lend in several kind of alts (even parallel) and you want to protect yourself from the exchange rate change? As you're the lender, you can tell the borrower that you lend e.g. 100 LTC (and it worths e.g. 200 BTC at that moment), and you want to get the repayment in BTC (200 BTC plus 3%), and you're covered, without a need to hedge anything. This makes the borrower to run the risk of the exchange rate change, and you're fine.