The Zenith review found the average return for Zenith rated active extension long/short managers was 20.1 per cent during the 12 months, above the ASX 300 accumulation index return of 16.1 per cent.
Zenith said the average return for Zenith rated variable beta long/short managers was 14.8 per cent.
“Given the average net exposure of the rated variable beta long/short managers was 67 per cent over this period, below benchmark absolute performance for the variable beta long/short manager universe was not surprising.”
Zenith Investment Partners chief investment analyst Rodney Sebire said while the headline performance of the equities was strong, and all sectors within the index delivered positive results, performance across the major sectors was certainly variable.
“Opportunities for generating alpha on the short side were therefore very much tilted towards successfully identifying companies experiencing stock-specific challenges,” said Mr Sebire.
Zenith also undertook a detailed analysis comparing the “performance of Australian equity long/short funds with their long-only flagship equivalents to quantify if investors are being compensated for the additional risks assumed”.
“Australian equity long/short funds have delivered higher returns on a net of fees basis, with slightly higher volatility (as measured by standard deviation) compared to their long-only equivalents,” said Mr Sebire.
He said the level of excess returns generated as a proportion of active share has been less for long/short funds.
“Reasons for this outcome are one of either managers having less skill in identifying short stocks, or the market environment being less conducive for generating alpha on the short side,” he said.
“Given the market environment over the last 12-months, in Zenith’s opinion, the latter is the more likely scenario.”
Zenith said that out of an initial universe of 26 Australian equity long/short products, 14 were assigned a positive rating, four were rated highly recommended, seven were rated recommended and three were rated approved.
The BlackRock Australian Equity Opportunities Fund, Perpetual Wholesale Share-Plus Long-Short Fund, Regal Long-Short Australian Equity Fund and Bennelong Kardinia Absolute Return Fund were the four funds to receive a highly recommended rating.
