Strength found in long/short equity funds
The Australian and international long/short equity fund sector is a stand out performer according to research house Lonsec, which has just completed a review of the area.
A total of 15 funds were assessed, including five Australian products, seven international offerings and three regional funds. Six of the offerings were examined for the first time.
Following the review, Lonsec awarded a ‘highly recommended’ rating to seven funds, a ‘recommended’ rating to seven funds, and an ‘investment grade’ rating to one fund.
The review also revealed the short portion of Australian portfolios struggled in 2005, as well as a reduction in the proportion of hedge funds that employ a long/short strategy.
As a result of the review, Portfolio Partners emerged as the only Australian equity manager to earn a ‘highly recommended’ rating. The ‘highly recommended’ international funds included MLC-Platinum, Platinum and Goldman Sachs JBWere.
Although all of the funds belonged to the long/short sector, Lonsec found there were a wide variety of styles being applied.
The Perpetual Share-Plus Fund, for example, is usually close to 100 per cent net long, while the Smallco Investment Fund at times employs a 50 per cent net market exposure with a small cap bias.
Advisers needed to be aware of the differences to recognise that one fund cannot always be easily substituted for another in a portfolio, Lonsec said.
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