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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 Sharpe ratio has ranged from a high of 0.85 since inception, to a low of -0.21 over the past 12 months. Its Sortino ratio (which excludes volatility in positive months) vs the index has ranged from a maximum of 1.34 vs. the index's 0.5 since inception to -0.4 vs. the index's 6.77 over the past 12 months. In May, individual pair contribution was generally modest. The number of negative pairs exceeded positive pairs. Ongoing rotation into lower rated companies was a headwind for the fund, offset by some excellent company results. ALQ/AZJ was the Fund's top pair, with ALQ reporting a strong full year result. All segments are growing and the company has dealt with the difficult environment of the last year very well. ALL/SGR was the Fund's second-best pair with Aristocrat reporting a strong result, well ahead of market forecasts. Bennelong noted Aristocrat is enjoying the payoff from years of consistent and productive investment in both its land based and digital divisions. |
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