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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. The Bennelong Market Neutral Fund, with same strategy and liquidity is available for retail investors. |
| Manager Comments | Positive contributing pairs outnumbered loss-making pairs. The top contributors over the month was the long Seek / short Fairfax pair. The Fund continues to hold this pair. This pair was unprofitable last year, however Seek's increased investment spending improved top-line growth, and this came to fruition in the recent interim financial result. In contrast, Fairfax's interim financial result prompted earnings downgrades due to growing evidence that Fairfax is not sufficiently monetising it's digital audience to overcome continued declines across its print advertising publications. On the other side, a key negative contributor for the month was the long Ramsay / short Primary Healthcare pair. While, Ramsay delivered a quality result with (again) an upgrade to full year earnings guidance, Primary staged a strong rally following relief after it's financial result that a capital raising was not necessary. Click below to read the Fund Manager's commentary and market outlook. |
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