19 Dec 2018 - Performance Report: Bennelong Long Short Equity Fund

By: Australian Fund Monitors

Report Date	19 December 2018
Manager	Bennelong Long Short Equity Management, a Bennelong boutique
Fund Name	Bennelong Long Short Equity Fund
Strategy	Equity Market Neutral
Latest Return Date	November 2018
Latest Return	-3.07%
Latest 6 Months	-7.61%
Latest 12 Months	3.33%
Latest 24 Months	17.69%
Annualised Since Inception	15.51%
Inception Date	01 January 2003
FUM (millions)	AU$403.5
Fund Overview	Bennelong Long Short Equity Management applies a qualitative stock selection process to construct a diversified portfolio of paired securities based on relative value. The Bennelong Long Short Equity Management strategy invests primarily in the S&P/ASX 100 and is dollar neutral at cost. 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	The Bennelong Long Short Equity Fund has risen +3.33% over the past 12 months versus the ASX200 Accumulation Index's -0.96%. Since inception in February 2002, the Fund has returned +15.51% per annum versus the Index's +7.57%. The Fund's Sortino ratio of 1.50 versus the Index's 0.38, in conjunction with the Fund's down-capture ratio since inception of -156.94%, highlight the Fund's capacity to significantly outperform, and thus protect investors' capital, in down markets. The Fund returned -3.07% in November, with performance impacted by elevated market volatility and macro concerns which overshadowed fundamental company news. Bennelong noted earnings updates provided at AGMs and financial results released during the month led to three profit downgrades in the short book, however, this was offset by two downgrades in the long book. The top pairs were long Orica / short Downer EDI and long Harvey Norman / short Myer/Coca-Cola Amatil. The worst performing pairs included long BlueScope Steel / short Sims Metal, long Origin Energy / short AGL Energy and long ALS Ltd / short Aurizon.
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Fund Monitors Pty Ltd

19 Dec 2018 - Performance Report: Bennelong Long Short Equity Fund