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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 | The majority of the Fund's pairs contributed positively during the month (17 of 29). The one negative pair of note was long Challenger (CGF) / short AMP & IOOF (IFL), with IFL experiencing a rally after news that the Federal Court ruled in favour of IFL in a case brought by APRA. On the positive side, the Fund had a solid contribution from a telco pair and two energy pairs. In their latest report, Bennelong highlight a chart which caught their attention in September which shows continued increase in debt levels of US corporates. Measured as a share of GDP, this now sits above prior peak levels. They noted they wonder what the end game is for cheap debt, and how much further indebtedness can rise before risk appetite changes. |
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