Global Equities Market ripe for Long/Short managers says Zenith
The global equities market is ripe for long/short managers according to Zenith Investment Partners latest Global Long/Short equities Sector Report released this week.
The 12 months to 30 September 2015 has been another strong year for the sector says Zenith (including Asian, Global and Specialist Long/Short), supported by a positive backdrop for global equities more broadly. Global Long/Short funds delivered an average return of 16.3% compared to 18.3% for the MSCI World Index ($A).
Although generating a lower return than the Index in absolute terms, Global Long/Short funds have demonstrated materially stronger risk-adjusted returns.
According to Justin Tay, Zenith’s lead analyst on the sector, the market environment within global equities has been conducive for long/short managers. “It has been refreshing to see a departure from the predominantly macro driven markets over the past few years. The last 12 months in particular has exhibited high levels of performance dispersion within both geographies and sectors, providing greater opportunities for active managers to express their stock selection skills. This is of even greater significance for Long/Short managers given the added flexibility available to them.”
Tay went on to add “By way of example, the Consumer Discretionary and Consumer Staples sectors returned 7% and 4% respectively over the last twelve months, versus Energy and Materials, which returned -33% and -22%, respectively in US Dollar terms. Given the magnitude of negative returns within Resources more broadly, driven by weak commodity and energy prices, there has been scope for managers to add value through shorting. Despite this, we observed that most managers opted to maintain relatively high net equity exposures, with some managers holding little to no short positions at all.”
In this year’s report, Zenith explores the investment case for Global Long/Short strategies, outlining the benefits of their increased flexibility, in addition to analysing performance through time and under different market regimes.
2015 saw the addition of five new International Shares – Long/Short strategies to Zenith’s Approved Product List (APL). Tay noted “These additions provide increased depth within a sector of the Zenith APL that has traditionally been more limited with regards to available investment options.”
Summary of the Zenith 2015 International Shares – Long/Short Sector Review
From an initial investment universe of 29 International Shares – Long/Short products, the ratings outcome for Zenith’s APL for the sector was as follows:
- Highly Recommended – no funds
- Recommended – 14 funds
- Approved – 6 funds
