12 Mar 2019 - Performance Report: Bennelong Long Short Equity Fund

By: Australian Fund Monitors

Report Date	12 March 2019
Manager	Bennelong Long Short Equity Management, a Bennelong boutique
Fund Name	Bennelong Long Short Equity Fund
Strategy	Equity Market Neutral
Latest Return Date	February 2019
Latest Return	-0.82%
Latest 6 Months	-15.35%
Latest 12 Months	-2.78%
Latest 24 Months	10.94%
Annualised Since Inception	15.11%
Inception Date	01 January 2003
FUM (millions)	AU$382.8
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 returned +15.11% p.a. since inception in January 2003 versus the ASX200 Total Return's +8.05% p.a. over the same period. The Fund's Sortino ratio of 1.45 versus the Index's 0.43, average negative return of -2.45% versus the Index's -3.07%, largest drawdown of -15.35% versus the Index's -47.19% and down-capture ratio of -163.51% collectively highlight the Fund's capacity to significantly outperform in negative markets over the long-term. In addition, the Fund's Sharpe ratio of 0.90 versus the Index's 0.38 highlights the Fund's ability to achieve superior risk-adjusted returns. The Fund's performance was modestly negative in February (-0.82%). Bennelong experienced a mix of winners and losers across the 31 pairs in the portfolio. They noted reporting season led to a slight downgrade to market earnings forecasts with resources positive and industrials negative. They were comfortable with their overall hit rate based on earnings revisions. By sector, the Fund saw positive contributions from Financials and Healthcare, while Mining/Resources and Energy lagged. Top contributors included long Macquarie / short Bendigo Bank and long Ramsay Health Care / short Healius. The worst pairs in the portfolio were long Challenger / short IOOF/ANZ and long Caltex / short Viva Energy. Bennelong noted the long portfolio continues to deliver superior earnings growth and return on equity/capital relative to the short portfolio.
More Information	Fund Profile Manager's Report AFM Research Reports

Fund Monitors Pty Ltd

12 Mar 2019 - Performance Report: Bennelong Long Short Equity Fund