Australia’s second-best performing hedge fund, Tribeca Alpha Plus Fund, is leveraging heightened market volatility during earnings seasons to generate substantial returns, capitalizing on the inadequacies of traditional investment bank research. Portfolio manager Jun Bei Liu highlights that the diminishing coverage from banks and brokerages, coupled with the rise of automated trading, has intensified discrepancies between market pricing and her fund’s perspectives.
Liu, whose Tribeca Alpha Plus Fund has achieved nearly 19% returns over the past year, attributes the fund’s success to these market dynamics. “The forecast dispersions have become enormous in the marketplace,” Liu stated, noting that the “juniorization” of research, marked by fewer updates from analysts, has worsened this trend.
A March 1 report from JPMorgan Chase & Co. identified February’s earnings season as the most volatile for single stocks in Australia over the past 15 years. The Alpha Plus Fund, which manages approximately A$1.35 billion ($910 million) using a long-short strategy, has benefited significantly from these conditions. Key holdings include Goodman Group, which has risen 32% year-to-date, Life360 Inc., up 144%, and A2 Milk Co., which has increased by 35%.
Liu notes that up to 70% of the fund’s outperformance relative to its benchmark occurs during Australia’s semi-annual earnings season. The scarcity of high-growth companies in Australia drives investors to increase their stakes in firms that demonstrate profitability, amplifying market reactions.
For instance, Brambles Ltd., the fund’s largest holding, saw its stock surge nearly 12% following its earnings report on Wednesday. Liu points out that such substantial moves in large companies were uncommon in the past, with consensus expectations typically holding off until full-year results.
The fund also saw gains from medical imaging firm Pro Medicus Ltd., which climbed 7.2% after reporting earnings on August 14. Although Liu has recently taken some profits, she remains open to buying more on potential pullbacks. Similarly, Life360, favored for its customer conversion potential, saw its stock rise 18% following its results on August 9.
Tribeca Alpha Plus Fund employs its own research alongside sell-side analysts’ forecasts to identify potential returns. With approximately 60%-70% of its positions in long bets and the remainder in shorts, the fund has achieved an average annual return of 13% over the past decade, making it the second-best performing Australia-based strategy for that period, according to Zenith Investment Partners.
