Australia's superannuation industry has begun a love affair with 130/30 long-short equities funds. And it is not alone.
Australia's superannuation industry has begun a love affair with 130/30 long-short equities funds. And it is not alone.
Entering 130/30 into an Internet news search yields literally hundreds of instances of pension funds across the world signing up these types of strategies in recent weeks.
Examples include Europe-based financial giant Blue Sky Group, which in April said it planned to shift its entire Eu4.2 billion passive global equity portfolio into 120/20 or 130/30 strategies.
The United States-based US$39.7 billion Teachers' Retirement System of the State of Illinois is another convert. It plans to allocate 10 per cent of its domestic equity portfolio to a 130/30 large-cap core strategy within the next two years.
In Australia, industry fund HESTA is one of many to sign up long-short managers this year. It has allocated 10 per cent of its total international equities strategic asset allocation to long-short managers.
Long-short 130/30 funds invest 70 per cent of the portfolio in long-only strategies and 30 per cent in short strategies. Because the manager sells 30 per cent of the portfolio short, an extra 30 per cent is available to spend on long stocks.
Hence the label 130/30.
HESTA's managers are all based in the US and comprise Acadian Asset Management, Axa Rosenberg and AQR Capital Management.
Acadian Asset Management is a specialist in 130/30 long-short funds and its chief executive Chris Clayton told Investor Weekly there was near insatiable demand for this type of strategy.
"We could have taken on a lot more money than we have already taken, but there are capacity constraints," Clayton said.
The firm closed its Australian equity long-short fund to institutional investors late last year and raised $500 million. Hostplus, Care Super, JUST Super and SPEC (Q) are all clients of Acadian.
Clayton said long-short strategies gave investors more opportunities than traditional long-only funds, but also urged caution.
"Many managers don't actually properly assess the stocks they want to sell short," he said.
"For managers that use a screening process it can become hard to differentiate between the good and bad stocks depending on the criteria they use."
Non-quantitative managers that embarked on long-short strategies could find it hard because they had to assess a whole lot more, he said. "Quant managers have historically done more research on what stocks to sell short and that is why they tend to be popular long-short managers," he said.
In Part 2 of our exclusive series, we ask leading names to nominate their best investments, the most effective industry group and the importance of platforms.
Since last month's issue, newspaper headlines have continued to scream out doom and gloom about the current markets, among them "Super losses", "Savage write-offs" and "More bad news".... read more »
Home delivered!
Daily news, weekday mornings
Get the day's news delivered direct to your inbox. Register here (it's free!) and choose 'yes' to receive the InvestorDaily newsletter.
Catholics revamp fixed interest »
Industry superannuation fund the Catholic Superannuation and Retirement Fund (CSRF) has revamped its fixed income portfolio.
Mercer backs alternatives »
Mercer has awarded $34.15 million in mandates to Tactical Global Management (TGM) and Lazard Asset Management to invest in alternative assets.
It is a belief of some planners that ASIC lost the opportunity to make inroads into the licensing of planners eight to 10 years ago when it was just getting on its feet.... read more »
