Lensfield Market Neutral · Professional investors only
Returns that owe nothing to the market.
An equity market neutral strategy: long the companies we expect to outperform their peers, short the ones we expect to lag, and hedged so that what remains is stock selection rather than market direction. Run beta-, sector- and factor-neutral, with the discipline of the firm's trading practice behind it.
- Objective
- Cash + 9–11%
- Net of fees, over a full cycle. A target, not a forecast.
- Target volatility
- 11–13%
- Annualised. Leverage is scaled to the target, not fixed.
- Market beta
- |β| ≤ 0.10
- Ex-ante band; realised beta reported monthly.
- Universe
- Developed equities
- UK and Europe first, liquid large and mid cap.
01What neutral means
"Neutral" is a set of constraints, not a slogan.
Many funds described as market neutral carry meaningful market exposure once you measure it after the fact. We define neutrality in four layers, constrain each one in the optimiser before a trade is placed, and report the realised numbers so investors can hold us to them.
The aim is a book in which most of the risk is specific to the companies we have chosen, and very little of it is the market, a sector, or a style factor in disguise.
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Dollar neutral
Long market value matches short market value, so a move in the whole market is offset in notional terms.
Net exposure within ±5% of NAV -
Beta neutral
Dollar neutrality still leaks if the longs are more volatile than the shorts. We balance predicted beta, then monitor realised beta on rolling windows.
|β| ≤ 0.10 ex-ante · realised reported monthly -
Sector neutral
Pairs are built within sectors, so a view on banks versus insurers never becomes a view on financials versus everything else.
Net per sector within ±3% of NAV -
Factor neutral
Exposure to size, value, momentum, quality and volatility is constrained against a commercial risk model, so returns are not a hidden factor bet.
Style exposures within ±0.2σ · ≥75% specific risk
| Lensfield Market Neutral | Typical long/short equity | |
|---|---|---|
| Net market exposure | Around zero by construction | Usually 30–70% net long |
| Source of return | Relative performance of longs versus shorts, plus the yield on cash | Market direction plus stock selection |
| Volatility | Targeted at 11–13% | Often 10–15%, moving with the market |
| Behaviour in a sell-off | Driven by spread between books, not the index | Falls with the market, usually less |
| Role in a portfolio | Diversifier: a return stream uncorrelated to equities and bonds | Equity substitute with a cushion |
02The options
Four ways to be neutral. We chose two, with a third alongside.
Market neutral is a family, not a single strategy. Before designing the fund we weighed the main approaches against what a boutique can credibly do well: depth of stock knowledge, the cost of data and infrastructure, access to borrow and financing, and how crowded each trade has become.
The verdict. Fundamental equity market neutral is the core, with a factor-neutral systematic sleeve to keep the book honest and to scale. Merger arbitrage is run as a satellite when deal spreads pay. Statistical arbitrage, convertible arbitrage and fixed-income relative value were considered and declined: each depends on balance sheet, financing terms or technology spend that favour the largest platforms.
03Process
From a universe to a book, in four steps that do not skip.
Ideas come from research; positions come from the optimiser; neither gets to overrule the other. The same sequence runs every day the fund is open.
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Universe
Developed-market equities with the liquidity and borrow to be shorted at size. Around 1,200 names, screened monthly for free float, turnover and stock-loan availability.
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Research
Analysts own sectors and build pairs with a thesis, a catalyst and a price at which they are wrong. The systematic sleeve ranks the same universe on its own signals, independently.
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Construction
A risk-model optimiser sizes every position subject to the neutrality bands, liquidity limits and the volatility target. Conviction sets the ranking; the optimiser sets the weight.
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Execution and review
Orders are worked algorithmically to limit footprint. Realised exposures are reconciled daily against the ex-ante book, and every pair is re-underwritten when its thesis or its price moves.
04Risk
The shape of the book, and the limits that keep it.
Neutrality is enforced in construction and verified after the fact. The figures below are the indicative design ranges for the strategy; the live book is reported to investors monthly against each of them.
| Sleeve | Long | Short | Net |
|---|---|---|---|
| Fundamental pairs | 80–125 | 80–125 | ±3 |
| Systematic | 60–100 | 60–100 | ±2 |
| Event | 0–30 | 0–30 | 0 to +5 |
| Total book | 150–250 | 150–250 | ±5 |
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Realised market beta
|β| ≤ 0.10 · reviewed if > 0.15 for 20 days
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Gross exposure
≤ 500% of NAV · scaled to 11–13% volatility
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Sector and country net
±3% sector · ±5% country
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Single name
≤ 3% long · ≤ 2.5% short · ≤ 3 days ADV
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Style factors
±0.2σ each · ≥ 75% specific risk
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Liquidity
≥ 90% of book liquidable in 5 days
Measured at one third of average daily volume, so the fund can meet monthly redemptions without changing its shape.
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Drawdown protocol
−5% gross halved · −8% book review
Pre-agreed, mechanical, and reversed only once realised volatility has returned inside the target band.
Design ranges, not guarantees. Limits are monitored daily by a risk function independent of the portfolio managers and may be tightened without notice.
05Vehicle and terms
Indicative terms for the launch class.
Set to the norms a new manager is held to today: a cash hurdle so that the performance fee is earned on alpha and not on interest, a founders' class for early capital, and liquidity that matches how fast the book can actually be sold. Final terms are set out in the offering documents only.
- Structure
- Cayman Islands master-feederRegulated European wrapper (Irish ICAV) under consideration for a later class.
- Investment manager
- Lensfield Capital, LondonUK alternative investment fund manager; authorisation status to be confirmed.
- Management fee
- 1.5% per annumFounders' class: 1.0%.
- Performance fee
- 20% above a cash hurdle, with high-water markHurdle: SONIA (or SOFR for USD classes). Founders' class: 15%.
- Liquidity
- Monthly, 30 days' noticeSoft lock of 12 months; 25% investor-level gate.
- Minimum
- USD 1,000,000Founders' class open to the first USD 50m, or for twelve months.
- Currencies
- USD, GBP and EUR hedged classes
- Service providers
- Prime brokers, administrator and auditor to be named in the offering documentsTwo prime brokers for borrow and financing diversity.
- Reporting
- Monthly letter with realised beta, exposures and factor attribution
- Managed accounts
- Available above USD 50m, on the same strategy and limits
Indicative and subject to change. Nothing on this page is an offer; any offer is made solely by the fund's offering documents.
Enquiries
Allocating to market neutral?
Professional investors and their advisers can request the strategy paper, the risk framework in full, and a conversation with the portfolio managers.
hello@lensfieldcapital.com