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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 | The Fund's under-performed was due to an even mix of winning and losing pairs with no particular position having a disproportionate impact on return. The top 3 spreads for the month came from the following pairs; Long Quantas/Short Flight Centre, Long Adelaide Brighton/Short Boral and Long IIuka/Short Downer. The month's market rotation out of the higher quality and defensive names toward lesser quality names on lower multiples or with cyclical potential hasn't caused the Fund to change its portfolio position. Instead, the investment team accepts that their preferences to be long in business with better growth prospects can sometimes lead the long book to trade at a price-premium to the short book. Hence, exposing the Fund to under-performance if either the premium becomes stretched or sentiment changes. However, the Fund has no plans to adjust its current positions unless justified by changes in the fundamentals. Click below to read the Fund Manager's commentary and market outlook. |
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