Monday, June 10, 2024

L1 Long-Short Fund

The L1 Long-Short Fund (LSF.AX) is a closed end hedge fund listed on the ASX. It has had a very strong performance, beating the ASX 200 by threefold since its inception in 2014. But is it worth investing in now. The fund trades at a premium of about 9% to net asset value, as we might expect from a fund that has historically outperformed the market. So, that is a negative but not too large a premium. I plotted the fund's total return iondex (NAV not market price) against the ASX 200. The pattern looked familiar. It was a lot like that of Regal Funds' RF1.AX listed fund:

I set all three total return indices to 1000 in May 2019 when Regal Investments debuted on the ASX. What are the performance statistics of the two funds relative to the ASX? Since mid-2019, LSF had a beta of 1.066 and RF1, 0.80. The monthly alpha of the two funds have been 1.05% and 1.07%. RF1's alpha is a little more precisely estimated. The betas of the two funds using market price instead of NAV are much higher. RF1 has been around 1.3.

At this stage I am not that inclined to invest in LSF given I am invested in RF1, but I might add it in the future.

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