In November several Australian long-short managers bounced back strongly just as the broader S&P/ASX 200 slipped about 3% on renewed inflation worries and fading enthusiasm for artificial intelligence names. While many traditional long-only funds were caught in the tech-led sell-off, a group of hedge funds used sharper stock selection, aggressive short positions and a tilt towards resources to turn volatility into profit.
One prominent Melbourne manager reported a 7.5% gain for its long-short strategy in November, lifting its calendar-year return to more than 40%. The result was helped by exposure to copper and gold producers and by a short position in a major Australian bank that fell around 11% over the month and is now roughly 20% below its peak. That bank still trades at close to three and a half times its tangible book value, well above typical levels for large developed-market banks. Some managers see more downside if earnings growth stays subdued. The same fund also doubled its position in a major building materials stock after it was unexpectedly dropped from a key index, then added around $4 per share as the price rebounded during the month. It also picked up gains in gaming and fuel distribution names that recovered from earlier weakness.
The biggest fireworks came from a commodity-focused Melbourne hedge fund that returned about 18% in November and more than 160% over the past year by aggressively backing precious metals and copper. Silver has surged past $US60 an ounce after more than doubling this year, gold has climbed roughly 60% and copper is up more than 30% to a record above $US11,700 a tonne. This has created a powerful tailwind for miners listed in both Toronto and on the ASX. That fund has leaned heavily into a cluster of gold and silver producers and developers whose share prices have doubled, tripled or even risen ninefold this year. It appears to be positioning for further gains if lower US interest rates, strong central bank demand and renewed investor inflows keep supporting bullion and related metals.
Another Sydney-based long-short manager also enjoyed a strong November, posting an 8% gain after a patchy run as capital rotated out of fashionable AI-linked technology stocks and into so-called “AI losers” such as online classifieds and more traditional “real economy” businesses. Its book was helped by a rebound in gaming and asset management stocks and it continues to hold a short position in a major corporate travel operator in expectation of better entry points to take profits. Elsewhere a global long-short fund that focuses on exposing overhyped, speculative or structurally weak companies delivered a near 6% monthly gain after a difficult year while still backing large, profitable US technology platforms on the long side.
Not all short-sellers shared in the spoils. One small-cap focused fund fell nearly 5% in November as several of its favoured smaller growth names pulled back, which undercut performance. Another long-short strategy run by a major Australian asset manager lost just over 2% for similar reasons, giving back ground on popular technology and fintech stocks even as it joined peers in betting against a high-flying corporate travel group. The mixed outcomes show that the current environment looks supportive for nimble, research-heavy hedge funds, yet it also seems to punish mis-timed shorts and concentrated positions quickly. This underscores how fragile gains can be when markets are driven by shifting narratives around inflation, interest rates and AI.
