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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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L1 Long Short Fund Limited 2026 Q3 Investor Letter | Buyside Digest

Back to Fund Profile (L1 Long Short Fund Limited)

Primary Source Intelligence • Q3 2026 Letter Analysis

L1 Long Short Fund Limited Quarterly Analysis

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

Fund Returns

QTD+3.4%

YTD+16.4%

Annualized+14.7%

Positioning StanceCONSTRUCTIVE

Market CapAll Cap

GeographyEurope, Asia, Other

Digest Analysis

Quick Take

"Exploiting heightened market dispersion and commodity volatility by accumulating mispriced infrastructure-like compounders and resilient resource producers while shorting highly valued Australian retail banks facing margin compression."

Executive Summary

L1 Long Short Fund delivered a net return of 3.4% for the September 2026 quarter, outperforming the S&P/ASX 200 Accumulation Index return of 1.3% by 2.1%. Year-to-date calendar performance reached 16.4% net of fees, compared to 3.7% for the benchmark, while the one-year net return stands at 32.8% against 2.7% for the index. The portfolio closed the period with gross long exposure of 146%, gross short exposure of 103%, and a net equity exposure of 43%, maintaining 57 long positions and 20 short positions with a pronounced quality-value orientation trading at a median multiple of approximately 11x forward earnings. Macroeconomic conditions were characterized by intensifying Middle East geopolitical friction and a re-acceleration of global inflation pressures. Surging crude oil and refined diesel prices drove central banks toward more hawkish policies, with the Reserve Bank of Australia raising the cash rate to 4.6% and the U.S. 30-year Treasury yield climbing to 5.60%. Despite benchmark resilience, internal equity market dispersion was severe as index breadth narrowed around mega-cap artificial intelligence holdings, while rate-sensitive sectors endured significant share price drawdowns. Portfolio returns were anchored by long gains in resources and materials alongside short positioning in overvalued banking. Strong performance in DPM Metals, Santos, and Taseko supported returns, while short exposure to Commonwealth Bank of Australia generated alpha amid decelerating mortgage lending. In response to wide valuation dislocations, the investment team trimmed selected copper positions following strong runs, maintained gold exposures, and accumulated oversold high-conviction holdings including The Lottery Corporation and infrastructure-exposed construction materials.

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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%)

Positioning demonstrates targeted conviction through explicit deep dives into core holdings such as The Lottery Corporation and dedicated commentary on specific long and short positions like Santos, Fraport, and Commonwealth Bank of Australia. However, conviction is tempered across the broader fund by a diversified footprint containing 77 total holdings across international and domestic jurisdictions.

Growth Outlook

40%

BearishBullish

Neutral (40%)

Broader index expectations remain decidedly cautious given sluggish Australian economic growth, deteriorating housing metrics, and extreme index concentration among richly priced large caps. The manager emphasizes that while headline benchmark indices appear calm, underlying equity dispersion and rising bond yields create substantial vulnerabilities.

Risk Appetite

55%

DefensiveAggressive

Balanced (55%)

The portfolio operates with moderate net equity exposure of 43% alongside substantial gross exposures of 146% long and 103% short. This indicates deliberate hedging and willingness to deploy active short capital rather than adopting an unhedged directional market posture.

Capital Deployment

55%

De-riskingDeploying

Net Neutral (55%)

Deployment activity exhibits a disciplined balance between opportunistic re-investment into beaten-down value names and harvesting capital from outperforming commodity positions. The fund preserves liquidity while opportunistically deploying into infrastructure materials and lotteries.

Forward Guidance

65%

CautiousExpansionary

Expansionary (65%)

Capital deployment shows a selective bias toward adding to indiscriminate sell-offs in defensive infrastructure-like compounders and construction materials exposed to non-residential infrastructure. Simultaneously, the team has taken profits by reducing selected copper equities after sharp price appreciation.

Language Signal

52%

BearishBullish

Balanced (52%)

Letter vocabulary reflects an even distribution between macro warnings regarding sticky inflation, hawkish rate hikes, and geopolitical shipping shocks alongside constructive commentary identifying mispriced value equities with double-digit EPS growth.

Perceived Risk

78%

Low RiskElevated

Elevated Risk (78%)

External macro conditions are regarded as fraught with risks, prominently highlighting multi-decade highs in long-term bond yields, persistent central bank rate hikes, widening fiscal deficits, and geopolitical energy supply bottlenecks in the Middle East.

Opportunity Density

75%

ScarceAbundant

Abundant (75%)

Elevated market dispersion driven by artificial intelligence concentration and surging bond yields is viewed as generating an unusually rich set of mispriced individual securities. The manager explicitly notes that current volatility provides a superior opportunity set for disciplined active stock picking.

Time Horizon

65%

Short-TermLong-Term

Multi-Year (65%)

Investment frameworks are oriented around multi-year horizons, underscored by long-dated asset licenses extending through 2068 for TLC and major multi-year production milestones for Santos and Fraport. Immediate 12-month catalysts like jackpot normalization and preliminary mining assessments are framed within long-term duration theses.