Australia’s hedge fund scene is having a resurgence as nimble long‑short strategies pull ahead of traditional long‑only managers during a choppy sharemarket. In November, the main local index dropped about 3% amid renewed inflation worries and nervousness about heavy spending on artificial intelligence, which hit high growth tech names hard. That volatility created an environment where funds that can profit from both rising and falling prices are finding fresh momentum.
One prominent long short fund lifted its return by 7.5% in November, taking its calendar year gain to more than 40% and was helped by a mix of copper and gold positions and a sizeable short against a major Australian bank that has slipped about 20% from its peak. The bank still trades at more than three times its tangible book value, a level the manager sees as hard to support given muted profit growth expectations over the next couple of years. The same fund also leaned into building materials, topping up holdings after an index removal pushed prices towards $26 and then riding a rebound to around $30, while benefiting from a recovery in a gaming manufacturer and a fuel supplier.
Another Melbourne based long short strategy with a strong commodities tilt posted an 18.3% gain for the month and has surged more than 160% over the past year. That performance rests largely on the spectacular run in precious metals, with silver climbing past $US60 an ounce after more than doubling in 2024, gold jumping about 60% and copper surging over 30% to a record near $US11,800 a tonne. The fund’s concentrated stakes in North American gold and silver producers, some up between two and nine times this year, along with an Australian gold developer that has nearly tripled, show how focused exposure to a hot theme can dominate results. The manager is positioning for further strength in bullion and silver next year if US interest rates ease and demand from central banks, consumers and exchange traded funds stays robust.
In Sydney, another hedge fund reversed a soft patch with an 8% November gain as investors rotated away from richly valued tech stocks and towards so called AI laggards such as online classifieds and traditional media driven businesses. The recovery in an international gaming group and a local asset manager also helped, while the fund continues to wait for its short bet against a global travel company to pay off. A separate long short fund that targets what it sees as speculative and overhyped stocks delivered a 5.8% monthly gain after a difficult year, helped by short positions in highly popular retail names that it considers more story than substance while it maintains long exposure to a major global technology platform.
Not every manager on the bearish side came out ahead. One small cap focused fund slipped 4.8% in November as several smaller market favourites pulled back, including names in insurance, fintech and investment platforms. Another long short strategy lost about 2.3% across similar areas, with losses in buy now pay later, data centres, logistics property and software, even as it joined the growing group of funds betting against a high profile travel stock. The split performance shows how timing and stock selection matter as much as the overall call on markets.
Taken together, the results suggest long short hedge funds seem to be regaining their edge in an environment marked by rate uncertainty, tech fatigue and resurgent commodities. Success is clustering around three themes, shorting expensive financials, embracing the metals rally and rotating into businesses seen as more insulated from an AI slowdown. However these trades rely on trends that can quickly unwind, so while recent numbers look impressive the real test for these strategies will come if inflation cools faster than expected, tech sentiment rebounds or metals prices lose momentum.
