Long/short managers in middle of golden streak

Australian long/short fund managers are expected to continue to outperform the market for the next 12 months after having also done so for the past year, according to data released by research house Zenith.

In its annual Australian Long/Short Sector Review, covering the 12 months to 31 May 2015, Zenith found that Australian Long/Short - Active Extension and Variable Beta managers in its investment universe delivered an average return of 10.2 per cent.

This performance was 0.3 per cent above the S&P/ASX 300 Accumulation Index with returns being driven by a mix of 80 per cent market exposure and lower levels of volatility than the wider index.

Zenith, senior investment analyst, Rodney Sebire said a low correlation of performance between industry sectors and high performance dispersion within sectors had created market conditions favourable for long/short managers.

He pointed to the strong performance of healthcare and telecommunications, which returned 33 per cent and 24 per cent respectively for the past 12 months, compared with the energy and consumer staples sectors which returned -15 per cent and -7 per cent, respectively over the same period.

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Sebire said long/short managers can expect another solid 12 months with further mean reversion in market sectors, such as financials (banks), telecommunications, healthcare, and property, which have been inflated by the yield trade.

As part of the review Zenith examined an initial investment universe of 26 Australian Shares Long/Short products and rated two as highly recommended, seven as recommended, three as approved and one under review.