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L1 Global Long Short Fund Limited (ASX:GLS) posted an impressive 18.9% net return in the June quarter of 2026, significantly surpassing the MSCI World Index’s 13.8% gain. Since its ASX listing in late November 2025, the fund’s Global Long Short Strategy has achieved an annualized return of 57.0%, driven by wide-ranging stock selection and strategic global equity positioning. The latest quarterly report highlights how AI infrastructure growth and geopolitical events, including the Iran conflict and ceasefire, influenced performance amid volatile markets and an AI-driven equity rally.
Key Points
- L1 Global Long Short Fund Limited (ASX:GLS), managed by L1 Capital, focuses on a global long-short equity strategy with diversified exposure across international markets and sectors.
- The fund returned 18.9% net of fees in Q2 2026, outperforming the MSCI World Index by 5.2 percentage points through broad stock selection and tactical positioning.
- Since its 28 November 2025 inception, the Global Long Short Strategy has delivered 57.0% per annum versus the MSCI World’s 20.9%, outperforming by 36.1 percentage points annually.
- Over six months, GLS posted a 10.6% net return, beating the MSCI World’s 9.7% by 0.9 points, with 26 stocks each contributing over 0.5% to quarterly gains.
- The portfolio’s median long position trades at 10x price-to-earnings, with double-digit EPS growth and low debt, per the fund manager’s analysis.
Broad-Based Stock Selection Drives 18.9% Q2 Return, With 26 Positions Contributing Significantly
L1 Global Long Short Fund’s 18.9% return in the June quarter outpaced the MSCI World Index by 5.2 percentage points, reflecting strong stock picking across a diversified portfolio. The quarterly report reveals that 26 individual stocks each added more than 0.5% to returns, indicating the fund’s outperformance was broadly based rather than concentrated in a few holdings.
The fund manager’s approach of targeting high-quality companies trading below fair value generated consistent gains amid global equity volatility. Unlike the broader market rally focused on AI stocks, the fund’s diversification offset weakness in commodity-exposed assets, particularly gold and uranium, which were pressured by falling oil prices after the Iran ceasefire.
AI Infrastructure Boom and Hyperscaler Spending Propel Market Shifts
The quarter saw an extraordinary surge in AI-related equities, fueled by hyperscaler cloud capital expenditure expected to surpass US$1 trillion in 2027 — a fivefold increase over four years. Major cloud providers including Amazon, Microsoft, Google, Meta, Apple, and Oracle drove demand benefiting semiconductor, foundry, and memory producers in Asia, especially Korea, Taiwan, and Japan.
AI-related stocks dominated global equity gains, with Korea up 84%, Taiwan 46%, and Japan’s Nikkei rising 37% in the quarter. Semiconductor leaders TSMC, Samsung, and SK Hynix returned 37%, nearly doubled, and tripled respectively. Despite this concentration, GLS’s disciplined positioning focused on high-quality companies at reasonable valuations, enabling strong outperformance.
Iran Ceasefire Sparks Oil Price Drop and Sector Rotation Away From Energy
The Iran conflict and subsequent ceasefire were key market drivers. Oil prices plunged about 40% from April peaks to around US$70 per barrel by June’s end, triggering a rotation away from energy stocks, the worst-performing MSCI World sector that quarter, and defensive sectors like utilities and consumer staples.
Geopolitical tensions remain elevated, with renewed U.S.-Iran strains and Strait of Hormuz shipping concerns pushing oil prices back above US$80 per barrel. The fund’s modest gold and uranium holdings suffered amid broad commodity declines, highlighting the complex link between geopolitics and sector rotations during ceasefire-induced market shifts.
U.S. Equity Gains Concentrated in Narrow AI-Driven Tech Sector
U.S. equities led global gains with the S&P 500 up 15% and Nasdaq-100 rising 22% in Q2 2026. However, the fund manager noted these gains were "heavily concentrated in a narrow cohort of AI-related stocks," contrasting with GLS’s broad-based outperformance across 26 stocks rather than a few mega-cap tech names.
The Federal Open Market Committee’s unchanged rates but hawkish tone reinforced expectations of a prolonged higher-rate environment, influencing sector valuations and encouraging GLS’s value-driven positioning away from crowded AI trades.
European and Asian Markets Show Divergent Strength Amid Infrastructure and Defense Spending
European equities gained 14% (MSCI Europe ex-U.K.), supported by financials and industrials benefiting from higher rates, infrastructure projects, defense spending, and AI-related power investments. Consumer sectors showed mixed results amid softer domestic growth.
Asian markets excelled, driven by semiconductor and memory producers in Korea, Taiwan, and Japan, reflecting strong earnings and supply constraints amid the global AI infrastructure build-out. This sector and geographic dispersion underscores the interplay of macroeconomic, geopolitical, and technological forces shaping 2026 markets.
Since Inception, GLS Strategy Generates 57.0% Annualized Returns, Outperforming MSCI World by 36.1 Points
Since L1 Capital took over management on 28 November 2025, GLS’s Global Long Short Strategy has delivered 57.0% annualized net returns, vastly outperforming the MSCI World Index’s 20.9% over the same period. This early success highlights the effectiveness of disciplined stock selection and valuation focus in capturing alpha globally.
Returns before this date reflect the higher-fee L1 Capital Global Long Short Fund – Daily Class. The ASX-listed GLS vehicle offers Australian investors access to this strategy, with a six-month net return of 10.6% slightly surpassing the MSCI World’s 9.7%, demonstrating consistent value identification amid AI-driven market rotations.
Fund Manager Adopts Cautious, Quality-Focused Positioning Amid Mixed Macro Outlook
The fund manager’s commentary describes the 2026 rally as "incredibly narrow," dominated by AI stocks, and emphasizes using this environment to identify high-quality companies trading well below fair value to withstand diverse macro scenarios.
The portfolio’s median long position trades at 10x P/E with double-digit EPS growth and modest debt, reflecting a focus on companies with solid fundamentals and reasonable valuations, avoiding the most overvalued AI-driven segments. This approach aims to build resilience across varying economic conditions.
Rising Global Bond Yields and Hawkish Fed Tone Challenge Valuation-Sensitive Stocks
Global bond yields rose amid inflation concerns during Q2 2026, easing somewhat after the Iran ceasefire. The U.S. Federal Open Market Committee kept rates steady but signaled a "higher-for-longer" stance, pushing yields higher and pressuring growth and tech sectors sensitive to discount rates.
GLS’s focus on high-quality companies with strong earnings and low debt may mitigate these headwinds by emphasizing current earnings over multiple expansion, positioning the fund for potential sustained higher rates.
Commodity Weakness in Gold and Uranium Offset by Diversified Portfolio Gains
While gold and uranium holdings declined due to commodity price drops following the oil price collapse, these losses were more than offset by gains across the broader portfolio. The diversified long-short strategy’s 26 significant contributors highlight the benefits of avoiding concentration and maintaining exposure to undervalued opportunities beyond the AI momentum-driven market.
This broad-based approach contrasts with the narrow AI equity rally, enabling GLS to capture wider market moves while managing risk amid sector rotations and geopolitical uncertainties.
