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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 Fund's gearing declined to 3.9X, down from 4.3X at the end of February, to counter market volatility. In this environment Bennelong remain focused on enhancing the attributes they are looking for in both the long and short portfolios. The Fund's trading activity was elevated as a result of volatility and opportunity. Bennelong noted it remains unclear whether the flow-on effects of a health crisis becoming an economic crisis will extend to a full-blown credit crisis. They highlight that the risk of financial distress in the economy is material, with the prolonged backdrop of artificially depressed interest rates via central bank intervention continuing to distort creditworthiness and capital allocation. |
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