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Market-neutral space to intensify: Pengana

Given investor dislike for market volatility, alternatives like market-neutral funds will become increasingly popular and move to a more prominent position within portfolios, according to Phillip Boustridge, fund manager with Pengana’s Australian Equities Market-Neutral Fund.

News Michael Masterman 14 April 2014
— 1 minute read

Mr Boustridge said he expects this increase in popularity to drive greater competition in Australia’s market-neutral fund space as investors seek opportunities that long-only funds are struggling to provide.


With extremely low exposure to market movements, industry sectors or market capitalisation, Pengana's market-neutral fund has "zero market correlation", according to Mr Boustridge.

“To get the pure market-neutral that we want, we have a long position and short position which will be very close to each other,” he said.

“This ensures as much as possible that there is no correlation with what is happening with the wider market".

As a case in point, Mr Boustridge says the fund is careful not to have too many large bank shares or resources stocks, which throw overall market performance out of whack.

“The fund’s strategy is to pick stocks for all environments and ensure we can limit losses or avoid having any (losses) in the event that markets collapse,” said Mr Boustridge.

“We start from a position of risk and then build the portfolio around that. This is the purest form of stock selection because we are stripping out all the systematic risk”.

According to a Pengana statement, the Australian Equities Market-Neutral Fund selects around 120 stocks on the market – based on four main categories: earnings revisions, value, quality and momentum - drawn from the S&P/ASX 300 Index, and these stocks are a combination of long positions and short positions.

The fund aims to generate annualised returns of between 5 per cent and 10 per cent over the RBA cash rate, net of fees, while keeping risk within a band of 8 per cent to 10 per cent, and the fund returned 19.2 per cent after fees in 2013 and 9.9 per cent p.a since inception in September 2008.

Market-neutral space to intensify: Pengana
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