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L1 LONG SHORT FUND LIMITED Net Asset Value 2018
65269_rns_2018-06-11_52995738-d8ef-4884-a18e-2a17ccb81156.pdf
Net Asset Value
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May 31, 2018
(ASX Code: LSF)
$(5.3%$
Key Details
| ASX code | LSF. |
|---|---|
| Share price | \$2.03 |
| Market capitalisation | \$1.35 Ob |
| Shares on issue | 664,839,144 |
| Listing date | 24 April 2018 |
Net Tangible Assets Per Share (As at 31 May 2018)
| NTA pre-tax | \$1.8936 |
|---|---|
| NTA post-tax | \$1.9283 |
Source: Link Fund Solutions. NTA Pre-Tax is calculated before all taxes. NTA Post-Tax is calculated after tax of realised and unrealised gains/losses. deferred tax assets, and deferred tax liabilities.
Commentary
May proved to be a disappointing month for the Company, returning -4.1%. The L1 Long Short strategy had its first month of falling more than 2% since September 2014.
There were three main drags on performance:
Long European Stocks - The Italian election caused European stocks, particularly European financials, to sell off heavily in May. European banks were down 10-20%, even those less exposed to Italy. We exited some positions that would be more susceptible from a broader European crisis but have maintained our core positions that are lower risk. These financials trade on single digit P/Es, at less than book value, 5-6% dividend yields and offer an asymmetric payoff as European bond yields rise from all-time lows. Our other stocks that are listed in Europe also got sold off despite being truly global businesses with a minority of their earnings coming from Europe (e.g. HeidelbergCement). We believe this sell off is an overreaction and have maintained our positions in these stocks.
Long Value, Short Growth/Momentum - Markets are at an extreme in terms of the relative valuation of growth/momentum versus value stocks, both in Australia and globally. The valuation differential is at multi-decade highs and we believe this will normalise over time. We believe this is the right positioning in a medium-term sense but accept it may cost us performance in the short term. We typically have a modest value bias in the portfolio, but that is more pronounced at the moment given how extreme the relative valuations are for growth versus value.
Stock-Specific News - The smallest impact on performance was stock specific news, such as Boral falling after a weak quarterly update. We have used the weakness to top up as we believe the medium-term upside is compelling. Boral trades on 13.5x P/E (FY19), with double digit earnings growth likely for the next few years.
We have made good progress on getting the portfolio set, with the Company now more than 90% invested.
Portfolio Exposures (Month End)
Total return since inception
| $\sim$ my and $\sim$ . | |
|---|---|
| Number of positions | 84 |
| Number of long positions | 45 |
| Number of short positions | 39 |
| Gross long exposure (%) | 111% |
| Gross short exposure (%) | 82% |
| Gross exposure (%) | 193% |
| Net exposure (%) | 28% |
| Investment Guidelines | |
| Typical number of positions | 50-100 securities |
| Geographic exposures | Max 30% outside of Aust/NZ |
| Net exposure limits | Max 150% of NAV; typically 30-90% |
| Gross exposure limits | Max 300% of NAV; typically 150%-300% |
| Net Performance | |
| 1 month | (4.1%) |
L1 Long Short Fund Limited
Source: Link Fund Solutions. Net performance is defined as the movement in NTA Pre-Tax. Performance is shown after all applicable fees and charges.
| Board of Directors | |
|---|---|
| Andrew Larke | Independent Chair |
| John Macfarlane | Independent Director |
| Harry Kingsley | Independent Director |
| Raphael Lamm | Non-Independent Director |
| Mark Landau | Non-Independent Director |
| Key Contacts | |
| Company secretaries | Mark Licciardo Adam Sutherland |
| Investor relations | Wayne Murray [email protected] |
| Manager | L1 Capital Pty Ltd +61 3 9286 7000 [email protected] |
| Registry | Link Market Services Limited 1300 554 474 [email protected] |
Overview and Investment philosophy
L1 Long Short Fund Limited has been established to invest in a portfolio of predominantly Australian and New Zealand securities, with up to 30% invested in global securities. The Company has the ability to both buy and short-sell securities, which provides a flexible strategy to deal with changing stock market conditions. The objective is to deliver strong, positive, risk-adjusted returns to investors over the long term.
The portfolio is managed by L1 Capital Pty Ltd, which has established a reputation for offering clients best of breed investment products. L1 Capital manages money for a range of clients including large superannuation funds, endowment funds, financial planning groups, asset consultants, family offices, high net worth individuals and retail investors.
DISCLAIMER: This communication has been prepared for L1 Long Short Fund Limited (ACN 623 418 539) by its investment manager, L1 Capital Pty Ltd (ABN 21 125 378 145 and AFS License 314302). L1 Capital Pty Ltd has prepared this publication without consideration of the investment objectives, financial situation or particular needs of any individual investor, and you should not rely on the opinions, advice, recommendations and other information contained in this publication alone. This publication has been prepared to provide you with general information only. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. We do not express any view about the accuracy or completeness of information that is not prepared by us and no liability is accepted for any errors it may contain. Past performance is not a reliable indicator of future performance.