L1 Long Short Fund Posts 45% Return and Raises Quarterly Dividend

• FY26 net profit after tax surges 538%
• Net portfolio return of 45.4% outpaces ASX200AI
• Dividend increased to 14.6 cents per share, now paid quarterly
• NTA per share rises 33% to $4.32 before tax
• First sustainability report published under AASB S2

Exceptional Financial Performance in FY26

L1 Long Short Fund Limited (ASX:LSF) has delivered a striking financial year ended 30 June 2026, with net profit after tax soaring to $634.59 million, a 538% increase over the previous year. This surge was powered by a 45.4% net portfolio return, significantly outperforming the ASX200 Accumulation Index’s 6.1% over the same period. The fund’s net tangible asset (NTA) backing per share climbed 33% to $4.32 before tax, underscoring robust asset growth.

The Investment Manager, L1 Capital, navigated a volatile global environment marked by geopolitical tensions, shifting interest rates, and concentrated market leadership dominated by AI-related stocks. Their disciplined bottom-up stock selection and fundamental research yielded strong contributions from sectors including Resources, Construction Materials, Infrastructure, and Travel. Notable contributors were copper producer Hudbay Minerals, building materials giants James Hardie and CRH, steelmaker BlueScope, and airline operator Qantas. Strategic increases in gold, copper, and construction materials exposure during market dips further bolstered returns.

Dividend Growth and Shareholder Returns

Reflecting the fund’s strong earnings and cash flow, the Board increased dividend frequency from semi-annual to quarterly during FY26, delivering fully franked dividends totaling 14.6 cents per share. This represents a compound annual growth rate of 22% since the fund’s IPO in April 2018, when the initial dividend was 1.5 cents per share. The latest fully franked final dividend of 3.8 cents per share is payable on 23 September 2026, with participation in the Dividend Reinvestment Plan open until 3 September.

The Board’s confidence in the fund’s outlook is also reflected in ongoing significant shareholdings by Directors and senior management, who have increased their investments during the year. The fund’s on-market buy-back program remains in place but was not activated during FY26.

Investment Strategy Focused on Quality Value Stocks

The portfolio maintains a pronounced tilt towards quality value stocks, targeting companies with compelling valuations, solid earnings growth, and strong cash flow. Core exposures include gold and copper producers, construction materials, infrastructure, and select financials. The Investment Manager actively adjusts net long exposure and uses both long and short positions to capitalize on market dislocations and valuation dispersion.

Market volatility at the end of FY26, driven by geopolitical tensions in the Middle East, created opportunities to selectively increase stakes in high-conviction investments trading below intrinsic value, while trimming positions that had reached fair value. This dynamic approach positions the fund to benefit from stabilizing market conditions.

Inaugural Climate-Related Disclosures and Governance

For the first time, LSF has published a Sustainability Report aligned with the Australian Accounting Standards Board’s AASB S2 Climate-related Disclosures. The report highlights the fund’s governance framework for climate risk, with the Board and Audit and Risk Committee overseeing climate-related risk assessments conducted by the Investment Manager and supported by external sustainability advisers.

The fund’s climate-related exposure arises primarily through its investment portfolio, with indirect risks from physical hazards like flooding and bushfires, and transition risks linked to carbon pricing and structural shifts away from high-emission sectors. The Investment Manager integrates these considerations into its fundamental research and portfolio management but found no material climate-related financial effects during the reporting period.

Qualitative climate scenario analysis under a high transition (+1.5°C) and high physical (+4°C) warming pathway concluded that the fund’s investment strategy remains resilient. The liquid and actively managed portfolio structure provides flexibility to adjust exposures as climate-related risks evolve.

Looking Ahead and Corporate Governance

The Board has scheduled the Annual General Meeting for 10 November 2026, inviting shareholder engagement. Directors reaffirmed their commitment to the fund’s long-term success and prudent risk management. The fund continues to monitor market conditions and climate-related developments to safeguard shareholder value.

With a track record of delivering strong absolute returns and a steadily growing, fully franked dividend stream, L1 Long Short Fund stands out in the listed investment company sector for its combination of performance and governance transparency.

Bottom Line?

LSF’s FY26 results underscore the strength of active, value-focused investing amid market volatility, but investors should watch how climate risks and geopolitical tensions shape portfolio adjustments going forward.

Questions in the middle?

• How will LSF’s portfolio evolve if geopolitical tensions intensify or market leadership shifts away from current sectors?
• Will the fund deepen its climate-related disclosures with quantitative metrics as data and methodologies mature?
• How might rising interest rates and inflationary pressures impact the fund’s quality value stock bias and dividend growth?