Amid stretched valuations and persistent market uncertainty, global long-short manager System Capital is urging investors to focus on structural disruption to cut through the noise and position portfolios for long-term growth.
Marking its third anniversary, the Melbourne-based firm reports that its System Capital Long Short fund has delivered 20 per cent per annum since inception, driven by a disciplined, bottom-up approach to identifying structural winners and losers across key sectors.
Set up in 2022, System Capital became an affiliate of global investment manager Fidante in February 2025, allowing it to grow and scale its funds under management.
Founder and portfolio manager Lev Margolin said understanding structural shifts is key to outperformance, regardless of market cycles.
Technology, media, information services, infrastructure, and industrials are areas he highlighted as being poised for the strongest transformation over the next five years.
“To identify businesses that will be structurally stronger in five years, you must analyse their fundamentals and trajectory. This includes suppliers, customers, regulators, and social license. It’s a disciplined, repeatable process that helps keep us focused,” he said.
The System Capital approach combines long and short positions, allowing investors to benefit from companies driving disruption while mitigating exposure to those at risk.
Short positions currently account for approximately 20 per cent of the portfolio, providing both protection and opportunity.
“This process reveals long-term winners and those at risk of disruption,” Margolin said. “Incorporating short positions adds both protection and opportunity for investors.”
The strategy also seeks to broaden geographic exposure beyond Australia and the US, capitalising on structural opportunities in Europe. By doing so, the firm aims to alleviate concentration risk while taking advantage of underappreciated markets experiencing major structural change.
The focus on structural disruption comes as valuation concerns intensify. Research from Fidante indicates that valuations are now the primary concern for advisers globally, surpassing other market risks.
The search for alpha has increased demand for alternative strategies, with 77 per cent of advisers allocating up to 10 per cent of client assets to alternatives. System Capital’s strategy provides daily liquidity, offering investors flexibility without sacrificing exposure to high-quality opportunities.
“Amid stretched valuations, persistent economic uncertainty, and deafening market noise, our long-short approach allows investors to identify quality companies at the right price and position portfolios for the long-term,” Margolin said.
