L1 Long Short Fund Limited

L1 Long Short Fund Limited (LSF) is an Australian Listed Investment Company (LIC) listed on the Australian Stock Exchange (ASX) with the ticker code LSF. Established in 2018, LSF has been actively managing shareholder funds for 5 years. The fund has a unique investment focus, aiming to provide strong, positive, risk-adjusted returns to investors over the long term.

L1 Long Short Fund predominantly invests in Australian and New Zealand companies, with the flexibility to allocate up to 30% of its portfolio to global companies. One distinguishing feature of this fund is its ability to both buy and short-sell securities, providing a flexible strategy to navigate changing stock market conditions.

L1 Long Short Fund Limited (LSF) has been operating for 5 years, making it a relatively new entrant to the LIC landscape. Despite its shorter operating history, it offers a unique investment strategy that appeals to investors seeking risk-adjusted returns.

Currently, L1 Long Short Fund has a market capitalisation of approximately $1.8 billion, signifying its presence as a significant LIC with a distinctive approach to investment.

When evaluating L1 Long Short Fund Limited (LSF) as an investment choice, consider these key metrics:

• Long-term performance: Assess LSF's long-term performance and its ability to deliver strong, positive, risk-adjusted returns to investors over the long term.
• Investment focus: Understand LSF's unique investment focus, which includes predominantly Australian and New Zealand companies, with the flexibility to invest in global companies. Consider how this aligns with your investment objectives.
• Short-selling capability: recognise that L1 Long Short Fund has the ability to both buy and short-sell securities, providing a flexible strategy to navigate changing stock market conditions.
• Fees: Take into account the cost of investing in LSF. The Management Expense Ratio (MER) is an important metric, and LSF's MER is calculated at 3.90% in the most recent financial year, which is on the higher side.

L1 Long Short Fund Limited's objective is to deliver strong, positive, risk-adjusted returns to investors by investing in a diverse portfolio of predominantly Australian and New Zealand companies, with the flexibility to include global companies. Its unique ability to both buy and short-sell securities offers a flexible approach to managing market conditions.

A Listed Investment Company (LIC) is one type of investment fund structure (i.e. shareholder funds pooled together and invested together, either actively by a manager, or passively). Other types of investment funds include Exchange Traded Funds (ETFs) (which can be both actively managed or passive), Listed Investment Trusts, or Managed Funds.

The different structures have their own positives and negatives, which are dependent on the goals of the investor and their own individual investment structure.

Some of the benefits of the LIC structure (the structure of LSF) include:

• It's a closed-end investment vehicle: Meaning the manager has a fixed pool of capital to invest with a long-term mindset, and doesn't have the risk of fast redemptions by investors in a time of market panic.
• They can smoothen out income to the investors: Which can be beneficial for both tax efficiency and emotional mindset, due to being able to retain profits over time (as compared to the trust structure, which must distribute income and crystallized capital gains to the investor in that financial year).
• The income will most likely be in the form of fully franked dividends: Which is an attractive form for Australian retirees due to the franking system in Australia. Since LICs are companies themselves and pay tax in Australia on profits, they receive franking credits paid on the tax they pay, in addition to the franking credits they receive from their investment portfolio. Well-managed LICs ensure their franking credit reserves are sufficient to pay future fully franked dividends (see 'franking reserves' chart above).