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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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L1 Capital Long Short Fund 2024 Q4 Investor Letter | Buyside Digest

Back to Fund Profile (L1 Capital Long Short Fund)

Primary Source Intelligence • Q4 2024 Letter Analysis

L1 Capital Long Short Fund Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, L1 Capital Long Short Fund. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

QTD-7.9%

Annualized+11%

Digest Analysis

Quick Take

"L1 Long Short Fund faced challenging Q4 with -7.9% return as extreme Growth factor dominance continued, but maintains conviction in quality value approach. Portfolio positioned in lower P/E stocks with strong cash flows while markets show significant overvaluation."

Executive Summary

L1 Long Short Fund returned -7.9% in Q4 2024 versus ASX200AI -0.8%, bringing full year returns to 2.0%. The portfolio faced significant factor headwinds as Growth stocks outperformed Value by 63% over the past two years, the largest divergence since 1978. Despite this challenging environment, the fund has delivered 15.1% p.a. over five years versus 8.1% for the index. The manager maintains conviction in quality, lower P/E stocks with strong cash flow generation, believing current valuations represent outstanding value relative to a market with significant pockets of overvaluation. Key contributors included gold equities amid 26% gold price appreciation, with positions in De Grey Mining and Westgold Resources performing well. The portfolio was impacted by domestic banking sector strength, continued Growth factor dominance, energy sector weakness, and governance issues at Mineral Resources. Management is using market volatility to add to oversold positions while rotating out of beneficiaries of recent moves, maintaining disciplined approach focused on stock-picking opportunities created by extreme valuation distortions.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

68%

CautiousHigh

Moderate (68%)

Manager demonstrates high conviction through concentrated gold positions, specific named holdings with detailed analysis (De Grey, Westgold, Qantas, Fraport), and willingness to maintain value style despite significant factor headwinds. However, diversified portfolio across 76 positions and hedged language about market conditions prevents higher score.

Growth Outlook

38%

BearishBullish

Neutral (38%)

Manager expresses caution about market valuations, stating domestic and global equity markets are generally fully priced with S&P500 and ASX200 trading well above long-term averages. However, they continue to find compelling opportunities in specific stocks and sectors, preventing a more negative score.

Risk Appetite

25%

DefensiveAggressive

Defensive (25%)

Portfolio maintains net exposure of 86% with continued focus on quality value stocks. Manager is selectively adding to oversold positions and rotating holdings, indicating moderate risk appetite despite market concerns. Not defensive but not aggressively risk-on either.

Capital Deployment

15%

De-riskingDeploying

De-risking (15%)

Manager trimmed some positions that rallied and moderately added to gold equities during sell-off, indicating selective rotation and modest net deployment. No specific cash level changes mentioned, but language suggests measured rebalancing rather than significant capital deployment or withdrawal.

Forward Guidance

10%

CautiousExpansionary

Cautious (10%)

Manager is selectively deploying capital by adding to oversold positions and rotating out of beneficiaries, but emphasizes using volatility rather than aggressive deployment. Language suggests measured, opportunistic approach rather than urgent deployment bias.

Language Signal

45%

BearishBullish

Balanced (45%)

Language contains more risk-focused terms (overvaluation, fully priced, susceptible to corrections, headwinds) than opportunity language, though manager does identify compelling opportunities and outstanding value in their portfolio. Balanced but slightly tilted toward caution.

Perceived Risk

72%

Low RiskElevated

Elevated Risk (72%)

Manager identifies multiple specific systemic risks including rising bond yields despite Fed cuts, equity risk premium near zero, record insider selling, and generally full market valuations. These are discussed in detail with historical context, indicating high perceived risk in the environment.

Opportunity Density

65%

ScarceAbundant

Abundant (65%)

Manager sees selective opportunities with major valuation distortions in specific stocks and sectors, particularly in cyclical stocks trading at depressed multiples. However, acknowledges markets are generally fully priced, suggesting opportunities require selectivity rather than being broadly available.

Time Horizon

70%

Short-TermLong-Term

Decade+ (70%)

Manager emphasizes medium-term outlook for cyclical stocks providing substantial upside for patient investors and expects multi-year themes in gold. References to elastic band stretching and eventual reversion suggest 2-5 year investment horizon, though no specific timeframes provided.