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| Fund Overview | In a typical environment the Fund will hold around 70 stocks comprising 35 pairs. Each pair contains one long and one short position each of which will have been thoroughly researched and are selected from the same market sector. Whilst in an ideal environment each stock's position will make a positive return, it is the relative performance of the pair that is important. As a result the Fund can make positive returns when each stock moves in the same direction provided the long position outperforms the short one in relative terms. However, if neither side of the trade is profitable, strict controls are required to ensure losses are limited. The Fund uses no derivatives and has no currency exposure. The Fund has no hard stop loss limits, instead relying on the small average position size per stock (1.5%) and per pair (3%) to limit exposure. Where practical pairs are always held within the same sector to limit cross sector risk, and positions can be held for months or years. |
| Manager Comments | The portfolio's 21 of their 31 pairs posted a profit. The Fund's strongest positive contributors were from three separate sectors: Retail (long Harvey Norman +0.1% / short Myer -23.2%), Financials (long Henderson +9.3% / short AMP -1.9%) and Gaming (long Aristocrat +13.3% / short Tabcorp +5.7%). On the negative side, the largest setback was in Healthcare (long Ramsay +1.7% / short Primary +18.6%) and in Gaming (long Crown -11.4% / short Sky City +7.5%). The Fund Manager's outlook for the equity markets is little changed since last writing that equities will likely remain well bid in the current environment of loose policy settings. However caution that risks have risen given valuation multiples are becoming demanding by historical standards and given US interest rates will likely rise sometime this year. Click below to read the complete Fund Monthly commentary. |
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