Australian hedge funds Totus Capital and Sage Capital posted improved performance in November, benefiting from a sharp rise in market volatility and a rotation away from crowded momentum trades, after a difficult period for short-biased strategies, according to a report by AFR.
Totus Capital’s Alpha long-short equity strategy, managed by Ben McGarry, gained 8% during November, significantly outperforming the ASX 300 Accumulation Index, which fell 2.6% over the same period. The result lifted the fund’s one-year performance ahead of the benchmark, although it remains behind on a year-to-date basis, with a 5.2% gain versus the index’s 9.2% advance.
The strong November showing followed earlier setbacks for the strategy, which had missed rallies in several heavyweight Australian stocks, including Commonwealth Bank and Wesfarmers. Totus was also positioned against Santos earlier in the year, as the energy major’s share price rose sharply.
In its investor update, Totus said the November performance provided renewed confidence in the fund’s short book, particularly in the event of a broader selloff linked to artificial intelligence-related stocks. The manager noted that markets weakened early in the month before rebounding, creating opportunities on both sides of the book.
According to Totus, investor sentiment shifted rapidly as confidence in the sustainability of AI-related capital expenditure began to fade, alongside growing uncertainty over the trajectory of US interest rate cuts. The fund said even modest doubts were enough to trigger a rotation away from highly valued AI stocks into more reasonably priced sectors.
One of Totus’ short positions benefited from the suspension of an ASX-listed company that later disclosed accounting issues following a change of auditor. While the fund did not name the company, Corporate Travel Management was suspended from trading in August after uncovering accounting errors. Totus said the announcement was worse than expected and that the position could deliver gains once trading resumes.
Sage Capital also capitalised on the market pullback in November, despite remaining down 2.4% for 2025, compared with a 3.6% gain for its benchmark. The firm said global equity markets remain close to record highs, but noted that Australian equities have begun to soften as bank valuations peak and pressure persists on growth stocks.
Sage said its broadly neutral investment approach helped limit exposure to sharp market swings. Key contributors included a long position in Qube Holdings following a takeover bid from Macquarie Asset Management, alongside a profitable short position in building materials group James Hardie.
