InvestNow News – 12th June – Salt Long Short Fund Fact Sheet – May 2020
The Fund experienced another solid month in May with a return of +1.80%. This performance came despite sizeable levels of hedging via our high beta, highly-priced short book and several of our key longs being relatively moribund.
We are sceptical of the sharp market rally in recent weeks given it appears to be dependent on an enormous infusion of monetary and fiscal stimulus which will need to taper at some point. The one year forward PE of 35.9x speaks for itself. Maybe the market is looking three years out but even then we estimate the PE to be 32.0x.
We have gradually moved net length down from around 40% to the mid-30% region, finishing the month at 36.3%. At these sorts of exposure, we perform very well on most negative days. There were just six down days for the NZ/Aust index in May, with an average return on those days of -0.89%. Contrastingly, we were up on five of those six days and had an average return on them of +0.39%. May 1 was particularly noteworthy, with Australia being -4.95%, NZ falling -0.79%, yet the Fund being up +0.37%. Given these sorts of numbers, we think we are very well placed for when extraordinarily priced equity markets descend back to earth.