Quest Long Short Australian Equities Fund
The Fund aims to outperform the S&P/ASX 200 Accumulation Index after fees over the medium to long term with an actively managed portfolio of long and short positions.
The Quest Long Short Australian Equities Fund aims to outperform the S&P/ASX 200 Accumulation Index after fees over the medium to long term with an actively managed portfolio of long and short positions.
Short selling (up to 30% of Fund NAV) aims to enhance returns when selected stocks are expected to fall or underperform.
Proceeds may then be reinvested in preferred long positions to further enhance returns.
The Fund invests in a portfolio of ASX listed or to be listed securities (long and short) that are generally chosen from the S&P/ASX 200 Index. The Fund may also invest in exchange traded derivatives to manage risk and cash or cash equivalents.
The recommended investment time frame is at least 3 to 5 years. The Fund may be suitable for consumers with a medium to long term investment timeframe.
The risk level of the Fund is considered high. The Fund aims to outperform the S&P/ASX 200 Accumulation Index after fees over the long term.
The Fund invests in a portfolio of ASX listed (or to be listed) securities (long and short) that are generally chosen from the S&P/ASX 200 Index.
The Fund may also invest in exchange traded derivatives (primarily traded on the ASX) and cash or cash equivalents.
The Fund will invest a portion of the portfolio in securities that it aims to profit from if the price of the security goes up. This is known as “long” equity exposure and is the more conventional practice of investing. The Fund will generally hold between 30 and 50 securities for its long equity exposure.
The Fund also uses short selling with the aim of enhancing returns. Short selling is the practice of selling securities that have been borrowed from a securities lender and selling them in the market for cash leaving the Fund with a “short” position. This is done in the expectation that the Fund can repurchase the securities at a price lower than the initial sale price due to the value of the securities falling and then return the securities to the securities lender. The difference between the initial sale price and the repurchase price (after fees) is the profit and is retained by the Fund. For example, if the Fund sells borrowed securities for $100 and later repurchases the equivalent securities for $90, the Fund will profit $10 (less fees) on the short sale. In addition to making a profit, the Fund can also use the $100 it initially receives to buy additional shares that the Investment Manager believes to be attractive, thereby “leveraging” the long positions. The Fund will generally hold between 10 and 30 securities for its short equity exposure.
The short positions are intended to enhance the Fund’s ability to add returns, preserve capital and manage portfolio risk.
Through its short positions, the Investment Manager targets stocks that are expected to underperform due to shorter term catalysts or event driven opportunities (tactical shorts) as well as longer-term structural decline (strategic shorts).
Long equity positions may range between 70% and 130%, with an individual stock limit of 15%. Short equity positions may range between 0% and 30%, with a short limit of 3% in any one stock. The maximum deviation from the index weight in any individual security is 10%. For each $100 invested in the Fund, the Investment Manager may buy up to $130 worth of securities (long positions) and short sell up to $30 worth of securities (short positions).
The net equity exposure may range between 70% and 100% and is typically expected to be between 85% and 100%. The maximum allowable exposure to cash is 30%.
The Fund may use exchange traded derivatives for the purposes of managing risk and to manage cash or cash equivalents. In all cases, there will be cash and/or underlying assets available to meet the exposure positions of the derivative instruments.
Broadly, the asset classes, asset allocation ranges and individual stock limits of the Fund are as follows:
| Asset class | Range |
|
Long equity positions
|
70-130% |
| Short equity positions | 0-30% |
|
Net equity exposure (ie the total long equity positions – total short equity positions)
|
70-100% |
| Gross equity exposure (ie the total long equity positions + total short equity positions) | 70-160% |
| Individual stock limits – absolute % of Fund NAV | 15% long, 3% short |
| Individual stock limits – relative to index weight | +/-10% |
| Exchange traded derivatives | 0-30% |
| Cash and cash equivalents | 0-30% |
The Fund invests predominantly in liquid assets that are generally chosen from the S&P/ASX 200 Index and the Responsible Entity and Investment Manager reasonably expect that the Fund will be able to realise at least 80% of the Fund’s assets, at the value ascribed to those assets in the most recent calculation of the NAV of the Fund, within 10 days.
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This information is intended as indicative and general information rather than advice. Quest Asset Partners holds an AFS Wholesale Licence. Quest’s products are not directly available to, and may not be appropriate for, retail investors. Retail clients may invest via a retail platform and should seek advice from their financial adviser before doing so. The information has been prepared without taking account of any individual’s objectives, financial situation or needs. The portfolio returns quoted above represent the return achieved if invested directly in the Quest Long Short Fund since inception (April 2020). Individual returns will differ for investors that invest on different platforms, made an initial investment after this inception date or where additional investments, redemptions or any SPP investments have been made. Past performance provides no guide to future performance. Neither Quest Asset Partners Pty Limited nor any member of Quest guarantees the performance of Quest funds, the repayment of capital or any particular return. Please contact Quest for further information.
Quest Asset Partners was formed in 2004 to create an independent boutique Australian equities manager that was motivated by performance and not by size. The firm manages in excess of AUD$2 billion for institutional, wholesale and wealth management clients. Quest is 100% privately owned by the investment team who have built a long standing and sophisticated 3 Stage investment process that dictates stock decisions and shapes portfolio construction. All staff are co-invested in the portfolios alongside clients. Quest has a long-standing track record with a recognised skill in analysing and investing, particularly in small and mid-cap stocks. The business adheres to strict compliance guidelines and embeds an understanding of sustainability into the investment process.
The Quest team believe they have a number of competitive advantages:
- Independently owned;
- A long track record of 18 years;
- Lack of staff turnover in the investment team thereby retaining intellectual property;
- In depth research that pinpoints the key drivers of performance and determines our target price. We believe accurate business assessment requires a combination of skills and that stock research is a mix of both art and science;
- A strong understanding of the business value chain;
- A process that continually reviews the quality ranking and valuation assumptions for each business;
- Access and capacity to interview senior management of investee companies and competitors;
- Willingness to undertake travel to differentiate business knowledge including finding similar business models in other markets;
- A nimble team that undertakes detailed peer review of business valuations; and
- A bespoke valuation template that allows sensitivity analysis.
Richard joined Quest Asset Partners as a Portfolio Manager in February 2020. Richard has 26 years funds management experience including managing the long short Antares High Growth Shares Fund for over 18 years including 12 years as lead manager. Richard was also the analyst for a range of sectors including diversified financials, food & beverage and packaging. Richard worked at AMP Capital between 1998 and 2000 where he worked in association with Chris and Michael.
Qualifications: B Economics, Macquarie Univ. Grad. Dip. Applied Finance, FINSIA
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Quest Asset Partners Pty Ltd holds a wholesale Australian Financial Services Licence from ASIC (AFSL Licence No. 279207).
As the holder of a wholesale AFSL licence, those who satisfy ASIC’s ‘Sophisticated’ or ‘Professional’ Investor requirements can come directly to Quest. Both the Quest Ex20 Trust and Quest Long Short Trust have an external Responsible Entity and are accessible for ‘Retail’ investors via Equity Trustees.
- QuestLong Short PDS from Equity Trustees: Link to Quest LongShort PDS
- QuestX20 PDS from Equity Trustees: Link to Quest X20 PDS
Quest SMA portfolios are available on investment platforms including Macquarie, JBWere, Mason Stevens, MyNorth, Netwealth, HUB24 and Xplore Wealth. Retail investors can access the SMA portfolios via their financial adviser.
Quest provides four Australian equity portfolios run by various members of the experienced team. All Quest portfolios utilise the long standing Quest investment philosophy of combining business quality and value disciplines. To satisfy ASIC requirements, some portfolios are available directly from Quest whilst others are accessed via financial planners, investment platforms and/or the Responsible Entity of our investment trusts.
The following table provides a table of accessibility.
Institutional Investors sign an Individually Managed Account (IMA) agreement directly with Quest which can be tailored to suit specific needs. Quest uses Link Fund Services (LFS) for back-office functions and Institutions elect the custodian. Please contact Quest for more information.
Quest Portfolios have ratings from various independent manager researchers, such as JANA, Willis Towers Watson, Lonsec and Zenith.
The current Lonsec ratings are (as at November 2022):
- Quest Concentrated - Recommended / 4 Stars
- Quest Ex20 - Recommended / 4 Stars
- Quest Long Short - Recommended / 4 Stars
Financial advisers can email quest@questap.com.au for the Lonsec and Zenith reports.
This depends on the product. The Trusts pay annual distributions. The SMA’s reinvest all income and realised gains. A client can redeem all or part of their investment at any time. Redemptions are usually settled in 2 days.
The Quest Long Short and X20 Funds have a minimum of $50,000. Please see your financial adviser to invest with Quest on Mason Stevens, Macquarie, HUB24, Netwealth, Xplore Wealth and MyNorth. The minimum investments are set by the platforms. For clients on the JBWere Multi-Asset Platform (Sophisticated Investors) the minimum investment is $250,000. Some minimums can be varied by agreement. Please contact Quest.
All portfolios have the objective of adding value after fees over the relevant portfolio benchmark over the medium term.
Portfolios have both Quest Investment Management fees and platform or trust fees depending on the investment structure. Please see the details in the particular PDS or platform documents.
questapQuest portfolios generally carry management fees and performance fees. Performance fees are paid when portfolios perform well. Most portfolios have performance fees on outperformance above a benchmark such as the S&P/ASX300 Accumulation Index whilst one portfolio has performance fees on returns above an absolute hurdle. All mandates with performance fees have high water marks for the benefit of clients where underperformance must be recouped before performance fees can be earnt.
Quest Directors have considerable experience managing large portfolios. Quest has chosen to remain a smaller boutique to ensure size is not an impediment to client returns. We have chosen a performance fee model to offset the smaller scale.
A central tenet of the Quest Asset Partners investment process is the assessment of business quality. We are attracted to companies that can demonstrate an ability to attain and sustain above average returns on capital employed. In our experience, companies that can maintain high returns on capital are rare and can become valuable. Consideration of Environmental, Social and Governance (“ESG”) factors are important inputs into our qualitative assessment of business quality. It may also impact our valuation of a company, reflecting our evaluation of the risks inherent in each business.
Quest philosophy is to provide ‘best ideas’ portfolios. We limit the stock numbers in each portfolio in order to maximise both the quality of holdings and the weights held in each stock. In this way we seek to maximise potential returns.
Our Concentrated mandate limits holdings to no more than 35 securities will be held in a portfolio and historically clients have held approximately 30 stocks. The Quest Ex20 has a 40 stock limit whilst the Long Short has a higher limit. A Quest portfolio will be more volatile than the relevant Australian equity index with the potential to deliver larger absolute gains or losses.
Prior to the launch of the Quest Long Short Fund in February 2020, Quest did not short sell stocks. The Quest Long Short Fund is classified as a 130/30 active extension strategy. Up to 30% of the portfolio can be shorted and reinvested in alternative long investments. In November 2022 the Long Short is 5% of Quest’s FUM, so shorting is currently a small activity at Quest.
Some Quest portfolios are available as SMA’s on various investment platforms such as Hub24 and Macquarie. Investors invest into a Separately Managed Account (SMA). This structure allows Quest clients to have their own individual portfolio that replicates a model portfolio. As a result, all clients have the same portfolio of shares. The shares are held in the name of the applicable custodian on behalf of our clients.
In contrast to pooled investment vehicles or unit trusts, investors retain individual ownership of the underlying investments managed by Quest and there is no transfer of capital gains between clients. This may allow clients to benefit from the tax advantages from discounted CGT benefits.
Only institutional mandates and the Quest Long Short allow for use of derivatives. In practice, derivatives are seldom used except to manage large client flows.
If you have any questions, please contact Quest on 02 94092333 or email quest@questap.com.au
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The issuer of this product is identified at the top of this page. The PDS and target market determination for the product are available in the Documents section of this listing. Prospective investors should consider the PDS before deciding to acquire the product. This product listing was vetted by and approved by the product issuer identified above before publishing. Investment Markets (Aust) Pty Ltd AFSL 527875 (IM) is not the issuer of the product.
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