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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 Q3 Investor Letter | Buyside Digest

Back to Fund Profile (L1 Capital Long Short Fund)

Primary Source Intelligence • Q3 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+2.4%

Annualized+11%

Digest Analysis

Quick Take

"Driven by strong performance from Qantas, CRH, and UK holdings like Tesco and NatWest."

Executive Summary

L1 Long Short Fund returned 2.4% in Q3 2024, bringing 5-year annualized returns to 18.4% versus 8.4% for the ASX200. The fund maintains its value-focused approach, targeting quality companies with strong cash flows trading at attractive valuations while avoiding overvalued areas like domestic banks and ASX20 mega-caps. Key contributors included Qantas (+27%), CRH (+24%), and Tesco (+17%), while energy holdings like Cenovus (-15%) and MEG Energy (-13%) detracted as oil prices fell. The managers see significant opportunities in UK markets, where they are buying leading companies at roughly half the earnings multiples of Australian peers. They added to gold exposure and materials positions during August's dislocation. Looking forward, they believe markets are generally fully priced but continue finding compelling opportunities in cyclical stocks trading at depressed multiples. The fund expects early stages of rotation away from crowded, expensive areas toward undervalued cyclicals and international opportunities.

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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

72%

CautiousHigh

High Conviction (72%)

The fund demonstrates high conviction through concentrated positions in named holdings like Qantas, Tesco, NatWest, and Rightmove with detailed investment theses. They provide specific valuation metrics, sizing language ('high conviction positions'), and clear views on individual companies. The 10-year track record discussion and detailed company analysis support strong conviction, though the diversified nature across 72 total positions prevents a higher score.

Growth Outlook

25%

BearishBullish

Bearish (25%)

The managers state that domestic and global equity markets are generally fully priced, indicating caution about broad market valuations. However, they express optimism about finding compelling opportunities in select areas and believe they are in early stages of recovery in cyclical stocks, providing a mildly positive but cautious outlook.

Risk Appetite

40%

DefensiveAggressive

Defensive (40%)

The fund maintained similar net market exposure to the previous quarter despite viewing markets as overvalued at aggregate levels. They are selectively adding to positions (gold exposure, materials during dislocations) while rotating out of beneficiaries, indicating moderate risk appetite with selective deployment.

Capital Deployment

25%

De-riskingDeploying

De-risking (25%)

The fund added moderately to gold exposure and took advantage of dislocations to add to materials positions like Mineral Resources. They maintained similar net market exposure to the previous quarter while rotating between positions. This represents selective, moderate deployment rather than aggressive capital deployment or significant de-risking.

Forward Guidance

30%

CautiousExpansionary

Cautious (30%)

The managers are using volatility to add to oversold positions and rotate portfolios, indicating selective deployment bias. They are actively positioning for rotation away from crowded areas toward undervalued opportunities, showing moderate forward deployment intentions.

Language Signal

20%

BearishBullish

Bearish (20%)

Language is balanced between opportunity and risk. Positive terms include 'compelling opportunities,' 'attractive valuations,' and 'early stages of recovery,' while risk language includes 'fully priced,' 'overvaluation,' 'crowding,' and 'uncertainty.' The balance slightly favors cautious optimism but with significant risk awareness.

Perceived Risk

65%

Low RiskElevated

Elevated Risk (65%)

The managers identify specific risks including crowding and overvaluation in certain market areas, with ASX200AI trading 15% above long-term average P/E. They note uncertainty from US elections, UK budget, and geopolitical tensions causing corporate investment hesitation. The detailed discussion of valuation premiums and market risks indicates moderate to high perceived risk in the environment.

Opportunity Density

70%

ScarceAbundant

Abundant (70%)

Despite viewing markets as generally fully priced, the managers continue to find compelling opportunities with major valuation distortions in select stocks and sectors. They highlight significant opportunities in UK markets and cyclical stocks at depressed multiples. The ability to identify specific opportunities across multiple geographies and sectors indicates good opportunity density despite challenging overall market conditions.

Time Horizon

75%

Short-TermLong-Term

Decade+ (75%)

The fund demonstrates a long-term approach with references to medium-term upside for patient investors, multi-year earnings growth expectations, and a 10-year track record discussion. They discuss structural advantages and long-term competitive positions of holdings. The patient capital approach and willingness to hold through volatility indicates a longer time horizon, though specific catalyst timelines prevent a higher score.