Long/short strategies beneficial to investors
Investors’ demand for downside protection has fuelled a surge in Australian shares long/short strategies, according to a Zenith Investment Partners report.
The rise in these strategies was additionally supported by a prolonged bull run in equity markets, followed by investors’ concerns about a possible market correction.
According to Zenith, over the year to March 2018 the amount invested in its rated Australian shares long/short strategies grew by 43 per cent to $8.7 billion, while over the past four years this segment has increased 78 per cent.
The firm also pointed to short selling and its growing appeal to investors, especially in times of market uncertainty, as it allows investors to profit when stocks or markets drop.
Additionally, when comparing long/short funds and traditional long-only funds, the analysis found that long/short funds captured 92 per cent of the market’s upside return, and when markets dropped, they managed to provide a much higher degree of downside protection.
Also, the long/short funds suffered only 57 per cent of the market’s decline, compared to 86 per cent for long-only funds.
Therefore, the outcome of the analysis clearly proved that long/short strategies could play a potentially beneficial role in investors’ portfolio, Zenith Investment analyst, Jacob Smart, said.
“It is also important to recognise that short selling is a specialised skill set that we assess carefully when rating funds,” he said.
“The ability to short sell effectively is a key determinant of success in the overall strategy.”
Recommended for you
There is one specific risk that is a significantly higher concern for financial services directors compared to companies overall and is impacting their risk appetite, according to the AICD.
Global fund managers are shunning bonds, with the asset class seeing the largest drop in allocations in more than 20 years.
Australian Ethical has seen its funds under management reach $10 billion, driven by organic customer growth and superannuation contributions.
Financial advisers will have access to private equity investments run by WTW for the first time as it launches a pooled fund to provide savers with access to traditionally institutional assets.