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| Strategy | |
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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 capacity to significantly outperform in falling and volatile markets is highlighted by the following statistics (since inception): Sortino ratio of 1.35 vs the Index's 0.45, maximum drawdown of -23.77% 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. Bennelong noted that in recent months a sharp step up in bond yields triggered a rally in the type of company they often include in their short portfolio. In April, bond yields steadied, the trend of rotation steadied and the Fund's performance improved. Whilst short term fund volatility has settled down considerably, Bennelong are running leverage slightly lower than normal, and have increased the number of pairs in the portfolio. They think there is a good chance market volatility will increase. Two thirds of pairs were positive during the month, with positive and negative pairs spread across a variety of sectors. The two most profitable pairs both performed well due to tailwinds of the current bullish commodity cycle. Both sides of the Fund's third best pair BSL/SGM announced a profit upgrade. The Fund's bottom pair JBH/SUL featured a sales update from JBH, but more influential on the share price was the surprise announcement that long serving CEO, Richard Murray has resigned to take on the CEO role at Premier. |
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