L1 Group, an Australian investment manager that oversees various funds and aims to generate strong returns for investors, recently experienced a dip in its funds under management (FUM) during the March quarter. The company reported a decline from $17.6 billion at the close of last year to $16.9 billion by March 31. This softening was largely attributed to the performance of its flagship L1 Long Short Fund, which faced headwinds from the escalating conflict in the Middle East and rising inflation expectations. However, L1 Group’s FUM has since shown resilience, rebounding to $17.9 billion by April 10, according to an ASX statement.
The high-profile L1 Long Short Fund, which manages $7.6 billion, saw a nearly 8 per cent drop last month alone. Its positions in companies like Qantas were impacted by higher jet fuel costs and softer travel demand stemming from the Iran war, while its holding in James Hardie was affected by rising mortgage rates weighing on housing activity. Despite this, the hedge fund attracted inflows over the March quarter, outperforming the S&P/ASX 200 Accumulation Index by 1.4 per cent. Over the past 12 months, the long short strategy has delivered an impressive 44.7 per cent return, positioning it among the top-performing hedge funds during that period. L1’s overall March quarter decline of just 0.2 per cent also compared favourably to many peers, with several prominent hedge funds reporting double-digit declines.
Chief investment officers Raphael Lamm and Mark Landau conveyed to clients their optimism regarding current market conditions, noting an abundance of high-quality stocks trading below their fair value. They highlighted that “periods of elevated market volatility can be unnerving in the short term, they provide outstanding medium-term opportunities to invest in great companies at exceptional prices.” Beyond its core strategies, L1’s affiliate funds, including its speciality gold fund, also secured inflows in the March quarter. The company plans to launch this high-performing gold fund as a listed investment company, expected to commence trading on the ASX on April 24. Meanwhile, Platinum Asset Management, which merged with L1 late last year, recorded $308 million in outflows during the quarter, a notable slowdown from the $854 million seen in the previous three months.
Shares in L1 Group responded positively to the update, jumping 4.7 per cent to $1.11 on Tuesday morning. The investment manager has demonstrated greater resilience compared to many publicly listed rivals over the past year, many of whom have contended with significant outflows due to underperformance and the growing appeal of lower-fee passive funds. This broader industry trend was further highlighted by global equity giant GQG Partners, which reported a substantial $12.2 billion in investor withdrawals from its funds in the March quarter.
