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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 | In September the Fund returned -3.85%, which Bennelong noted was due to a lack of profitable pairs. The short portfolio produced a small positive return whilst the long portfolio fell with the market. At the pair level around one third of pairs were positive, which Bennelong noted was out of the ordinary as a more typical outcome is that between half and two thirds of pairs tend to be profitable. Bennelong noted that, post reporting season, there was limited fundamental news during the month. Noteworthy for the Fund was a strong TPG Telecom FY18 result; the Fund is long TPG/short Telstra. Bennelong are optimistic about the proposed merger with Vodafone. In addition, Sims Metal downgraded their guidance only four weeks after delivering their result and guidance; the Fund is long BlueScope Steel/short Sims Metal. |
| More Information |
