Using the information in the Product Disclosure Statement for the Rushton Global Market Neutral Fund, you will discover how it may be possible to both decrease the risk and increase the return of an overall investment portfolio.

This PDS will give you...

Important information about a strategy that can potentially help you diversify your investment portfolio.  The minimum investment is just $50,000.



Key benefits of the Fund include ...

  • Strong target returns: the primary objective of the Fund is to generate a net return to investors of 12% per annum above the RBA cash rate over rolling three year periods;

  • No share market risk due to its market neutral approach;

  • A highly diversified strategy with approximately 400 - 600 positions held, across seven different countries;

  • The ability to perform well in rising or falling share markets and its success is not dependent on rising share prices; and

  • The investment strategy is lowly correlated to the share market, making it an excellent investment portfolio diversifier.

Here's what others are saying and why market neutral investing makes so much sense...

Why Market Neutral Makes Sense

Given that investors embrace the idea that some stocks are better to buy than others, it must also be that investors believe some stocks are better not to own than others. After all, a decision to own some stocks but not others is another way for investors to say that they expect some stocks to go up and others not to go up.

This is a critical point.

Based on the actions of investors, as a whole they expect some stocks to do better and other stocks to do worse than the overall market. And of course, that is an accurate statement. Every year some stocks do perform better and some stocks do perform worse than the overall market.

What is self-evident from what each of us has observed is that some stocks will rise and some will fall in the future. Because investors know this to be true, wouldn’t it make sense for them to act in complete accord with the idea? Because they know that some stocks will underperform, shouldn’t they invest some dollars in such a way as to benefit from that underperformance? Particularly when, by doing so, the amount of risk to their portfolio drops?

In the answer to those questions lies the most powerful argument in favor of market neutral investing.

If investors believe that stocks can be successfully purchased outright, then those same investors would be logically inconsistent if they did not also sell short some other stocks.  Moreover, by taking a market neutral approach, they have created a portfolio that is much less exposed to risk.

Anyone objecting to this argument must revert back to the point that it is difficult, or even impossible, to know which stocks will outperform and which will underperform. Fair enough. But if that is the reason to not use a market neutral strategy, it is also a reason not to actively pick stocks at all.

For those who say, “I don’t think I, or my financial advisors, can make a reasonable assessment about what to buy and what to sell short,” then the answer is: use an index fund.

When put this way, the choice really becomes quite clear. Investors should either be active and use a market neutral strategy or be passive and use an index fund. The middle ground of only buying some stocks (and the approach actually used by most investors) is logically inconsistent.

If investors know some stocks will fall and they believe there is some value in picking individual stocks, they should implement a strategy that includes both buying and selling short.

Market Neutral Investing: Build Consistent Low-Risk Profits by Creating Your Own Hedged Portfolio Eric Stokes

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What Others Say About Market Neutral Investing...

  • There is demonstrable portfolio improvement that is available by using market neutral in a traditional equity allocation.

    This fact has not gone unnoticed, with large international pension funds allocating to long/short and market neutral funds from their active and passive equity pools.

    This trend is one that we believe will feature more and more in SMSF and family office portfolios in Australia.


    Zenith Investment Partners (An independently owned investment research provider)

  • The Australian investment options are known to most of our readers.

    But one strategy appears to have been missed. Australian market neutral investments not only provide capital preservation and more reasonable participation in alpha than the average long only Australian equity fund but also are among the best performing strategies we rate globally.

    Australian market neutral strategies offer some of the best investment opportunities.
     

    Zenith Investment Partners (An independently owned investment research provider)
     

  • Investing in assets uncorrelated to the equities markets is a hallmark of rich family portfolios.

    As a result, if the markets are going down, rich families aren't necessarily going down with them.

    The uncompromising focus rich families have on protecting capital could be what sets them apart most from the rest of the market.

     

    BRW Magazine

  • One of the few strategies that were less affected by market forces during 2008 was equity market neutral.

    In an environment where the catch cry is about going back to basics, market neutral strategies and their low levels of correlation to the broader equity index should hold significant investor appeal.

     

    Zenith Investment Partners (An independently owned investment research provider)

The Definition and History of Market Neutral Investing

What is Market Neutral Investing?

 

    Market neutral investing is a strategy undertaken by an investor or an investment manager that seeks to profit from both increasing and decreasing prices in a single or numerous markets. Market neutral strategies are often attained by taking matching long and short positions in different stocks to increase the return from making good stock selections and decreasing the return from broad market movements.

 

How an amateur investor beat Wall Street’s top experts by 245% 

 

    Market neutral investing is the brainchild of an Australian amateur investor named Alfred Winslow Jones. 

 

    Back in 1948, Jones was working for Fortune magazine.  And he was working on a story about how Wall Street’s best and brightest picked winning stocks.

 

    Well, after interviewing the “best and brightest”, Jones came to a startling conclusion:  none of them had the slightest idea what they were doing. In fact, one so-called expert actually based his stock picks on the outcome of the annual Harvard-Yale football game.

 

    Now, Jones wasn’t a financial wizard. But he was very well educated.  In fact, he’d graduated from Harvard University, and he earned a PhD in sociology at Columbia.

 

    As you may know, sociology relies heavily on statistics.  So instead of following in the footsteps of Wall Street’s “best and brightest”, Jones used his statistical knowledge to create a unique investment strategy.  And the results were amazing you see, starting with an investment of $100,000 in 1949, Jones amassed a fortune of $4,900,000 by 1966. Yes, that’s correct—$4,900,000—49 times his initial investment.

 

    During those 17 years, he made an astounding average return of 27% per year—while the market returned just 11%. Amazingly, this amateur investor beat the market by a nearly 2.5 to 1 margin for almost two decades.

 

    In fact, Jones’ performance was so impressive that his former employer, Fortune Magazine, wrote an article about him in 1966.  The title? “The Jones Nobody Keeps Up With”.

 

The faster, safer way to rebuild your retirement dreams

 

   Today, this type of strategy is used by billionaires like James Packer and Frank Lowy. And it’s also used by the world’s wealthiest families and major institutional investors like Yale University Endowment. 

 

    But don’t worry.  This strategy isn’t just for billionaire investors and elite fund managers any more. It’s now available for those who manage their own super, as you'll discover in the Product Disclosure Statement.

    About the Chief Investment Officer

    Lee Rushton has over eleven years financial markets industry experience as an equity analyst and designer of quantitative investment models.

    Lee is one of a select group of Australian investment managers holding both a Chartered Financial Analyst (CFA) and Chartered Alternative Investment Analyst (CAIA) designation. He also holds a Master of Applied Finance and Investment (Securities Institute), as well as three Diplomas in finance and investment analysis.

    Lee has an outstanding academic record, achieving the Australian Stock Exchange National Dux for his Graduate Diploma of Applied Finance and Investment (Securities Institute), as well as numerous other academic awards and prizes.

    He has also lectured and written course material for a Master of Applied Finance degree for nine years, covering: equities, commodities, FX, futures, options, CFDs and advanced derivatives.

    With extensive knowledge and experience in equities and derivatives analysis, dealing and over ten years’ experience as an AFSL Responsible Manager, Lee is primarily responsible for the ongoing design and maintenance of the investment models that underpin the investment strategy, security selection and portfolio construction framework of Rushton Financial Services, as well as the day to day portfolio management activities.

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