"Passion and honesty are core to the success of any business": Q&A with L1 Capital founder Mark Landau on the L1 Long Short Fund LIC

The fund's objective is to deliver strong, positive risk-adjusted returns to investors over the long-term.

It takes a bottom-up fundamental investment approach. The investment process involves thorough research and due diligence. We conduct meetings with management, competitors, suppliers, board members and other relevant stakeholders to form a view of the long-term outlook for the company and the industry.

Our existing long/short fund has been extremely successful, returning 36.9% per annum after fees since inception. In 2017, we were awarded Eurekahedge "Best Asian Long Short Equity Fund 2017" and Zenith "Best Australian Equities - Alternative Strategies 2017". Given such strong endorsements of our investment approach, we were keen to broaden our investor base, which has historically been skewed to high net worth and institutional clients. We were keen to offer the strategy to retail investors in a shareholder friendly and easily accessible ASX-listed vehicle

Given that we believe returns are likely to be lower for Australian shares going forward, and volatility is likely to increase from historically low levels, we believe that our long short strategy can provide better downside protection in a falling market and also deliver alpha (or outperformance beyond the index return). Our long short strategy has also displayed low correlation with equity markets, which is important in providing diversification benefits versus other assets.

The fund essentially provides an investment structure that has a capital preservation focus without sacrificing returns.

Australian investors are heavily overweight cash, and given record low RBA cash rates this translates into very low real returns. Our fund provides the potential for strong risk-adjusted returns, i.e. the potential for significant capital growth with capital protection characteristics, the same strategy that has returned 36.9% per annum since inception.

Long/short funds enable the investor to generate returns regardless of market moves and also to benefit from rising market volatility. Therefore, we believe absolute return (long/short) strategies should represent an increasing portion of an investor's portfolio going forward (as market returns are likely to be lower).

We don't deny Australian investors need a mix in their portfolio but we believe there is an unmet need in the market for a proven long/short strategy that can be easily accessed by retail investors.

Core to our strategy is that we are contrarian investors and we don't follow market sentiment. Our investment approach involves detailed fundamental analysis, extensive due diligence, along with cross-checking our investment thesis with industry participants. We analyse company accounts, the balance sheet and cashflows in detail to de-risk our investments. We recognize that our main skill set is in doing company research, rather than predicting macro events, so we aim to lessen macro bets in the portfolio and ensure the performance is largely determined by the quality of our stock research.

Passion and honesty are core to the success of any business. We invest on the basis of extremely high standards for management and we would be arrogant to not expect the same from ourselves.

Our investment team is a very focused and committed team of professionals who take pride in the underlying fund performance and we invest most of our personal wealth alongside investors. Myself and Raphael Lamm, co-founders and joint CIO's of L1 Capital, have each invested $5 million in the IPO, consistent with our alignment with shareholder interests. We have also locked up that investment for a decade to show our commitment and confidence in the LIC. The board of the company are also investing significantly in the IPO, including a $1 million investment from chair Andrew Larke.

The fund has a diverse potential investor pool. All investors who seek strong risk adjusted returns but are wary of downside risk from equity markets. We believe the investment offers an especially good investment for investors concerned about capital preservation, but do not want to sacrifice potential returns.