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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 returned -0.65% in October. Performance was largely attributed to the top and bottom pairs with many of the pairs in between contributing nothing. Top pairs were long QAN / short FLT, long NWL, short IFL, and long LNK / short CPU. Bottom pairs included long A2M / short CCL, long CAR / short NEC. Bennelong noted wage subsidies, fiscal stimulus and other measures to compensate for lockdown are distorting measures of economic activity. They point specifically to the collapse in the number of companies entering administration (see latest report for the graph). Consequently, they foresee a high level of uncertainty regarding prospects for the economy when temporary measures are withdrawn. They also believe the RBA's recent interest rate cut, guidance on the duration of effective zero interest rates and quantum of QE is an indication of their concern. |
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