Australian long/short funds have seen strong inflows over the past year as advisers and their clients have sought the protection of short-selling strategies, says Zenith.
Funds under management in long/short strategies soared from $6.1 billion to $8.7 billion between March 2017 and March 2018, according to Zenith Investment Partners.
According to the research house’s latest Australian Shares – Long/Short Sector Report, Zenith-rated long/short funds outperformed the ASX 300 by 6 per cent in the 12 months up to 30 April 2018.
“The most significant period of growth was experienced over the most recent 12 months, with FUM increasing from approximately $6.1 billion to $8.7 billion, representing growth of 43 per cent,” the report said.
According to the report, the demand for long/short funds has been driven by the extended equities markets bull run.
“We believe this has led investors to become increasingly concerned about market valuations and a potential market downturn,” the report said.
Investors were turning towards long/short funds for protection of capital in the event of such a downturn.
Zenith investment analyst Jacob Smart added that long/short strategies could play a “beneficial role” in an investor’s portfolio.
“It is also important to recognise that short selling is a specialised skill set that we assess carefully when rating funds,” he said.
“The ability to short sell effectively is a key determinant of success in the overall strategy.”
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