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Alternative Market Briefing

Australia’s Zenith urges investors to understand net and gross exposure in long/short equity investments

Tuesday, June 25, 2013

Beverly Chandler, Opalesque London: Zenith Investment Partners has released its 2013 Australian Long/Short Equities Sector Review. Christopher Huang, Investment Analyst at Zenith says "It is commonly held that long/short funds are as, or less risky than the market. While we certainly believe that quality long/short funds improve an investor’s risk/return profile relative to investing in the index, we do caution investors to understand and be comfortable with the notion of both net and gross exposure. We caution that market risk (net exposure) is not the only risk that investors should be cognisant of. Gross exposure (i.e. exposure to the manager’s stock picking skills) is also of paramount importance."

The Zenith’s 2013 Australian Long/Short Sector Report discussed the notion of whether long/short funds are more or less risky than the market. "Active extension and variable beta funds have had solid returns in generally favourable equity market conditions over the past 12 months. Many of the funds we have reviewed in this sector have kept pace with the Australian equity market in the year to March 2013, with active extension funds benefiting more from the equity market rally than variable beta funds" the report said.

"Many of the active extension funds we have reviewed have maintained close to 100% net market exposures which have allowed them to achieve returns close to that of the Australian equity market. In......................

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