Zenith has completed its 2013 Equity Market Neutral Sector Review.
From an initial universe of 13 Market Neutral products, six funds were rated “Highly Recommended” and one fund was rated “Approved”. The seven funds that were rated are shown below with their respective ratings.
- Aurora Fortitude Absolute Return Fund – Highly Recommended
- Bennelong Long Short Equity Fund – Highly Recommended
- Blackrock 32 Capital Master (USD) – Highly Recommended
- BlackRock Australian Equity Absolute Return Fund – Highly Recommended
- BlackRock Australian Equity Market Neutral Fund – Highly Recommended
- Pengana Australian Market Neutral Fund – Approved
- Regal Tasman Market Neutral Fund – Highly Recommended
The above funds all demonstrate strong risk adjusted returns. The Zenith Investment Grade Market Neutral Funds 2013, as a group, returned a cumulative return of 246.94% in the 10 years to October 2012 (net of fees). Over the same time the broad Australian market has return 128.17%.
Daniel Liptak, Head of Alternatives at Zenith Investment Partners, explains why he considers there to be such outperformance potential from Market Neutral investing: “Short selling Australian equities is relatively unutilised in Australia relative to other regions where hedge fund activity is a larger part of the market. Short interest as a percentage of shares of issue is around half that of in the US. In our view, fewer hedge funds operating in Australia (as Australian equities specialists) creates an opportunity for short sellers here as there are fewer participants scouring the market.”
“While less competition is one thing, the ability to exploit this is another. In our view, while the hedge fund industry is less developed than in the US and Europe, there are nonetheless some excellent managers. We believe there is a rich talent pool sourced from a range of areas:
- Some funds are led by highly regarded ex-investment bank proprietary traders.
- Some individuals are returning Australians who after very senior roles in global hedge funds are now running similar strategies in the home market.
- Global investment banks proprietary trading desks are in retreat, due to increased regulation globally, and this has allowed local hedge funds to pick up strong talent. The retreat of proprietary trading desks has also reduced hedge funds’ natural competitors and thus increasing opportunities for managers.”