L1 Capital Long Short Fund Retail Class
L1 Capital (ASX: LSF) updates the market |
About this Fund
Fund Detail
PDS | |
FUND MANAGER | L1 Capital |
ASX Code | LSF* |
APIR | |
ASSET CLASS | LISTED INVESTMENT COMPANY |
INVESTMENT STYLE | L1 Long Short Fund Limited provides investors access to an absolute return fund that offers a highly diversified portfolio of long and short positions based on a fundamental bottom-up research process. |
INVESTMENT PROFILE | The Company's investment objective is to deliver strong, positive, risk-adjusted returns over the long term whilst seeking to preserve shareholder capital. |
CURRENCY MANAGEMENT | Hedged |
INCEPTION DATE | |
BENCHMARK | N/A |
FUND SIZE | N/A |
DISTRIBUTION FREQUENCY | Semi-annual |
NO. OF HOLDINGS | 50-100 |
FEES | 1.4350% p.a. (inclusive of the net impact of GST and RITC) |
STRUCTURE |
Benefits
Benefits | What are the benefits of the Offer?The Offer aims to provide investors with: access to a Portfolio that:
access to a manager, L1 Capital Pty Limited (Manager) that:
Investment objectivesThe Company's investment objectives are:
The investment objectives of the Company are not forecasts. The Company may not be successful in meeting its objectives. |
RISK LEVEL | |
INVESTOR SUITABILITY |
Risks
Title | |
Detail |
Key Features
What is the business model of the Company?The Company is a newly incorporated company which has not conducted any business to date. Upon completion of the Offer, the Company will be a listed company that will invest predominantly in Australian Securities (both Long and Short Positions). The Company may invest in Securities, Pre-IPO Securities, Derivatives, currency positions, cash and other permitted investments. Notwithstanding this broad mandate, the Company's Portfolio is expected to be predominantly comprised of Long and Short Positions in Australian and NewZealand Securities (with up to 30% of the Portfolio's gross exposure in Global Securities) (see Sections 3.4, 3.5 and 3.6 of the PDS). The Company's Portfolio will be managed by the Manager in accordance with the terms of the Investment Management Agreement between the Manager and the Company (see Section 9.1 of the PDS for a summary of this agreement). Investment StrategyThe Investment Strategy will use a fundamental, bottom-up research process to seek to identify mispriced Securities with the potential to provide attractive risk-adjusted returns. The Company's Investment Strategy will be implemented by the Manager which will aim to identify and invest in Securities issued by high quality companies with attractive valuations. The Company's assessment of high quality Securities is based on identifying companies with the following characteristics:
Investment PhilosophyThe Manager's investment philosophy is based on the 3 core beliefs that:
Investment ProcessThe Manager uses a fundamental, bottom-up research process to identify Securities with the potential to provide attractive risk-adjusted returns. While this involves many stages of analysis which can occur concurrently, below is an outline of the process from Securities specific research to the formation and maintenance of a portfolio. |
Mandate
How will the Portfolio be constructed?The Manager is responsible for the Portfolio construction. The Portfolio will be constructed in accordance with the Investment Guidelines agreed with the Company from time to time (initially being the guidelines set out in Section 3.5 of the Prospectus) and the Investment Process sets out in Section 4.4 of the Prospectus. The Company will invest in a portfolio designed to deliver strong risk adjusted returns while seeking to preserve capital over the long term. The Company may invest in Securities, Pre-IPO Securities, Derivatives, currency positions, cash and other permitted investments (See Sections 3.4, 3.5 and 3.6 of the Prospectus for full details). Notwithstanding this broad mandate, the Portfolio is expected to be predominantly comprised of Long and Short Positions in Australian & NZ Securities (with up to 30% of the Portfolio's gross exposure at the time of trade initiation in Global Securities). It is expected that the Portfolio will typically have net exposure (that is Long Positions minus Short Positions within the Portfolio) of 30% to 90% of the Portfolio's NAV. Other than Securities and Derivatives, the Company will typically be invested in cash or cash equivalent instruments. The Manager does not have allocation ranges or limits for the types of assets that it may invest in. The Manager will seek to diversify the Company's Portfolio as it deems appropriate and consistent with the Company's investment objectives. The Manager will also seek to diversify the Company's Portfolio to manage the risks associated with Short Selling. The Portfolio will be constructed in accordance with the Manager's investment philosophy which is based on the following 3 core beliefs:
The Manager seeks to select Securities that are attractive based on its assessment of:
What is the Company's leverage policy?The Manager is permitted to borrow on behalf of the Company. The Manager may use borrowings to increase the scale of the Portfolio of the Company or to purchase Securities outside of Australia in the relevant currency (for example in USD to purchase US Securities). In addition, the use of Derivatives and Short Selling may have an effect similar to debt leverage in that it can magnify the gains and losses achieved in the Portfolio in a manner similar to a debt leveraged portfolio. These risks give rise to the possibility that positions may have to be liquidated at a loss and not at a time of the Manager's choosing. Leverage is also created as the proceeds from Short Selling. Borrowed Securities are reinvested in the long portfolio. The Company may also borrow by Short Selling securities. In simple terms, because the Company's gross exposure (equalling the sum of Long and Short Positions) is greater than the amount of investors' capital, leverage is created. Unlike debt leverage however, the leverage is to the Security selection success of the Manager only. The only debt leverage providers are the Prime Brokers. There will be a maximum net exposure of 1.5 times the Portfolio's NAV (or 150%) and a maximum gross exposure of 3 times the Portfolio's NAV (or 300%). It is expected that the gross exposure of the Company will typically be between 150-300% of the Portfolio's NAV. It should be noted that while the Portfolio may have gross exposure of up to 300% of its NAV, investors in the Company would not have an exposure in excess of 100% of their investment in the Company's Shares. What is the Company's Derivatives policy?The Company's mandate allows for the Manager to invest in Exchange Traded Derivatives and Over-the-counter Derivatives, including options, future, swaps and equivalent cash settled instruments, which are traded on an exchange and/or non-exchange traded Derivative instruments dealt in on an over-the-counter basis. The underlying instruments include, but are not limited to financial indices, single stock options, interest rates, foreign exchange rates or currencies. The Manager chooses counterparties that are institutions subject to prudential supervision. All of the Company's Derivatives counterparties must have, in the Manager's reasonable opinion, sufficient expertise and experience in trading such financial instruments. Will the Company participate in Short Selling?The Company will engage in Short Selling as a component of the Investment Strategy to seek to benefit from falling Security prices and manage risk. The Company is expected to engage in Short Selling by borrowing securities from the Prime Brokers and providing Collateral on the terms and conditions set out in the International Prime Brokerage Agreements (see Section 9.3 of the Prospectus for details). Short Selling can magnify gains in the Portfolio but can also magnify losses. To manage this risk, the Company has adopted the policy in Section 3.5(c) of the Prospectus. For key risks to the Company associated with Short Selling, please see Section 5.3 of the Prospectus. What is the time frame for Portfolio construction?The Manager intends to deploy capital as quickly as practicable without impacting equity prices and existing portfolios of the Manager. However, the pace of the Company's capital deployment will be dependent on market conditions. Accordingly, the Manager estimates that it may take up to 3 months from the Company's listing on the ASX to construct the initial Portfolio. The Company's Portfolio will be constructed in accordance with the Manager's investment approach which aims to deliver positive absolute returns to investors while seeking to preserve capital over the long term. The Company's Investment Process combines valuation (primarily discounted cashflow) with qualitative considerations (management quality, long-term industry and company structure and business trends) to identify attractive investment opportunities. |