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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 number of profitable pairs exceeded the number of losing pairs; 17 positive, 14 negative. Long Caltex / Short Metcash was a top 3 pair. Both sides of the trade contributed positively despite Caltex absorbing the impact of the majority shareholder, Chevron, selling its 50% shareholding. Notwithstanding weakness in the Financials sector, key positive contributors to the portfolio were Long QBE / Short Suncorp benefiting from weakness in domestically focussed general insurers and Long Challenger / Short ANZ benefitting from weakness in banks. Within the negative pairs, our Long Resmed / Short Ansell position was key following a quarterly result from Resmed which the market took negatively. The Fund Manager continues to be apprehensive about the equity market valuation. Click below to read the complete Fund Monthly commentary. |
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