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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 as a Listed Investment Company (LIC) on the ASX. |
| Manager Comments | Performance in November reflected an even spread of positive vs negative pairs, however, the Fund's top contributors did not overcome the worst pair performers. These were: 1) long SEK / short NWS / short NEC; 2) long ALS / short AZJ; and 3) long Aristocrat / short Tabcorp. The most notable positive pair was long Origin / short CTX / short AGL, with Origin buoyed by a higher oil price and further announced cost reductions at its APLNG project. Bennelong noted the S&P500 has gained every single month in 2017 except in March when it fell -0.04%. There have only been three other calendar years in the entire history of the S&P500 Index (which commenced in 1923) where the Index has exhibited only one negative month. The Index normally has 3-6 negative months in any calendar year, hence Bennelong conclude the Index's trend in 2017 is consistent with other data showing a lack of volatility in the overall market such as the VIX Index. |
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