Global equities ripe for long/short managers

The global equities market appears increasingly attractive for long/short managers, according to the latest findings in the Zenith Investment Partners ‘2015 International Shares - Long/Short Sector Report'.

The report found that the 12 months to 30 September has been another strong year for the sector, which includes Asian, Global and Specialist Long/Short. However, while Global Long/Short funds delivered an average return of 16.3 per cent, compared to 18.3 per cent for the MSCI World Index in absolute returns, the report says Global Long/Short funds have demonstrated materially stronger risk-adjusted returns.

Zenith's lead analyst on the sector, Justin Tay, says the market environment within global equities has been conducive for long/short managers.

"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."

The report found, for example, that the Consumer Discretionary and Consumer Staples sectors returned seven per cent and four per cent respectively over the last 12 months, versus Energy and Materials, which returned minus 33 per cent and minus 22 per cent 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," Tay said. "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."