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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 Bennelong Long Short Equity Fund has risen +36.89% over the past 12 months against the ASX200 Accumulation Index's -10.21%. Since inception in February 2002, the Fund has returned +15.98% p.a. vs the Index's annualised return of +7.34%. The Fund's capacity to outperform in falling markets is highlighted by the following statistics (since inception): Sortino ratio of 1.63 vs the Index's 0.35, maximum drawdown of -17.73% vs the Index's -47.19%, and down-capture ratio of -162%. The Fund's down-capture ratio indicates that, on average, it has risen during the market's negative months. The Fund returned -3.26% in September, outperforming the Index by +0.4%. Half of the Fund's pairs made a positive contribution. The top and bottom three pairs made a similar offsetting contribution, with the net contribution slightly negative. Bennelong noted the negative return was a result of a broad spread across 15 negative pairs. It was also spread across sectors with no one sector standing out. The top and bottom pairs for the month were long Netwealth (NWL) / short IOOF (IFL) and long PointsBet (PBH) / short SkyCity (SKC). In their latest report, Bennelong discuss the sell-off in equity markets in September. They highlight that the declines were not isolated to those markets that have risen most since the March lows (namely the US and China), with markets like the UK and France, which have struggled to recover, falling further on fears of a resurgence in COVID-19 infections. They also provide their thoughts on why Australia isn't outperforming given the virus is under control, as well as Australia's relatively strong fiscal position. This is discussed in more detail in the report. |
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