Tribeca Alpha Plus Fund, Aussie equity long-short fund

Funds Management

by Rachael Jones

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Tribeca Alpha Plus Fund Portfolio Manager Jun Bei Liu talks about the fund's unique investment process, which combines decades of fundamental insight with quantitative rigour, current market conditions and performance.

Rachael Jones: Hello. I'm Rachael Jones for the Finance News Network. Joining me today from Tribeca Alpha Plus Fund is Portfolio Manager Jun Bei Liu. Jun Bei, welcome to FNN.

Jun Bei Liu: It's great to be here, Rachael.

Rachael Jones: Now first up, Jun Bei, could you give us an introduction to the portfolio and why it's a standout?

Jun Bei Liu: Alpha Plus Fund has been around for almost 14 years, and since the inception, we have outperformed by 8.3 per cent per annum. And since I took over the full management of the fund early last year, we've delivered 8.2 per cent return. This compares with the broader ASX 200 return of minus 0.3 per cent. So we are ranked in the top quartile across all Australian equity managers by Mercer Investments.

Rachael Jones: Thanks, Jun Bei. And now before we talk about the fund in more detail, can you tell us how long-short funds are performing this year?

Jun Bei Liu: Long-short managers have, again, outperformed the entire index, as well as the broader Australian equity managers universe. So they delivered, on aggregate, a return of down 6.4 per cent compared to the market down 7.7 per cent and the aggregate Australian manager universe of down 7.4 per cent.

Tribeca Alpha Plus Fund has performed very well compared to all of these managers. We've delivered a performance of down just 0.19 per cent.

Rachael Jones: And now to the fund in more detail. Can you tell us more, starting with the investment approach?

Jun Bei Liu: Alpha Plus Fund is unique in this way that we don't confine ourself to the traditional definition of growth or value manager. That means we go wherever the opportunity is. I always believe running a well-diversified portfolio, filled with companies from every sector, the top-quality companies and short the companies that have the structural challenges. Now our process is supported by a really strong team of analysts, and many of us have over 15 to 20 years' worth of experience. And most of us have been together for many, many years.

Rachael Jones: And can you talk to us about the key holdings?

Jun Bei Liu: For example, Domain Holdings Australia (ASX:DHG). Now, we love this company because it offers not only the cyclical recovery, it also offers this multi-year structural growth story. It is the second biggest operator in real estate listing market just after REA, but REA's market cap is eight times compared to Domain. The difference is REA started earlier, and REA has done an incredible job in monetising their market position. Now, Domain is coming from behind, but they’re catching up fast. We've seen incredible operational momentum just before, of course, the Covid disruption and the lockdown and the like, but subsequently, following the reopening in the last few months, we are seeing that momentum returning. So, we think this company will deliver great earnings growth, and it's probably one of the cheapest growth stocks in the market at this point.

Take another example. We like companies such as Scentre Group (ASX:SCG). Now, it's going through a world of pain at the moment, a shopping centre. But this company owns some of the most prime real estate in Australia. And at the current price, it's trading at 50 per cent discount to its net asset backing. That means, even if you buy those assets at the current price, assuming just buying it as asset value, you will still make money. Our view is, once we move past the coronavirus impact, in the next 12 months, the share price will return to its true valuation.

Rachael Jones: So Jun Bei, what's your outlook for the market and what opportunities do you see?

Jun Bei Liu: Let's go to the outlook first. Unlike many others, we're reasonably optimistic about the equity market, from the perspective that we believe the earnings have been cut significantly because of the lockdown. And from here on, over the next two years, we are actually looking at multi-year earnings recovery, or earnings growth, which we haven't seen for quite some time. And on that basis, plus cheap interest rate, has meant there's a lot of cheap money around. And what that does is inflating all the asset prices. Combining cheap money with the earnings recovery story, we believe the equity market is very well-positioned over the next one or two years.

And in terms of the opportunity, just on the sectoral level, there are so many high-quality businesses currently trading at a fraction of their real value. It's time to take position in them. These may include toll roads, private hospitals, airports. And some of those assets are non-replicable assets. So I would say the current market is filled with extreme market opportunities.

Rachael Jones: And to the last question now. What is the key message you'd like to leave investors and where can they find out more information?

Jun Bei Liu: Current market volatility is representing significant amount of opportunities for active investors. Take advantage of share price weaknesses caused by the pandemic lockdown and short-term earnings disruption. Right now represents probably a once-in-a-decade buying opportunity for some of those highest-quality companies. Once we move past the short-term earnings disruption, in two years’ time, those are the businesses that will see share price double. So, as investors, don't shy away from the equity market because of the volatility. Take advantage of the short-term price weakness, and stay invested. Any investors that are interested in finding out more, you can find us on www.tribecaip.com.

Rachael Jones: Jun Bei Liu, thanks so much for your insights today, and thanks very much for the introduction.

Jun Bei Liu: Thank you so much, Rachael, for having me. And it's been a pleasure. Thank you.


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